As filed with the Securities and Exchange Commission on February 22, 1996
Registration No. 33-6898
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
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)
(212) 363-1100
(Registrant's Area Code and Telephone Number)
WILLIAM J. MAYNARD, ESQ.
Bull & Bear Funds I, Inc.
11 Hanover Square
New York, New York 10005-3401
(Name and Address of Agent for Service)
Copies to:
R. DARRELL MOUNTS, ESQ.
BRIAN F. MCNALLY, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: as soon as practicable
after this Registration Statement becomes effective.
The Registrant filed a declaration registering an indefinite number of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Accordingly, no filing fee is payable herewith. The Registrant intends
to file by February 28, 1996, the notice required by Rule 24f-2 for its fiscal
year ended December 31, 1995.
It is proposed that this filing will become effective on March 24, 1996
pursuant to Rule 488.
<PAGE>
BULL & BEAR FUNDS I, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
BULL & BEAR FUNDS I, INC.
Form N-14 Cross Reference Sheet
Part A Item No. Prospectus/Proxy
and Caption Statement Caption
--------------- -----------------
1. Beginning of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Synopsis Information and Risk Factors Synopsis; Comparison of Principal
Risk Factors
4. Information About the Transaction Synopsis; The Proposed Transaction
5. Information About the Registrant Synopsis; Comparison of Principal
Risk Factors; Additional
Information About Acquiring Fund;
Miscellaneous; See also, the
Prospectus of Bull & Bear U.S. And
Overseas Fund, dated May 1, 1995
and previously filed via EDGAR,
Accession Number 796532-95-000004.
6. Information About the Company Being Synopsis; Comparison of Principal
Acquired Risk Factors; Miscellaneous; See
also, the Prospectus of Bull & Bear
Quality Growth Fund, dated May 1,
1995 and previously filed via
EDGAR, Accession Number
796532-95-000004.
7. Voting Information Voting Information
8. Interest of Certain Persons and Experts Not Applicable
9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to be
Underwriters
Part B Item No. Statement of Additional
and Caption Information Caption
--------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About the Statement of Additional Information
Registrant of Bull & Bear U.S. And Overseas
Fund, dated May 1, 1995 and
previously filed via EDGAR,
Accession Number 796532-95-000004.
<PAGE>
13. Additional Information About the Statement of Additional Information
Company Being Acquired of Bull & Bear Quality Growth Fund,
dated May 1, 1995 and previously
filed via EDGAR, Accession Number
796532-95-000004.
14. Financial Statements Annual Report of Bull & Bear U.S.
And Overseas Fund, dated February
15, 1996 and previously filed
via EDGAR, Accession Number
1005477-96-000002.
Annual Report of Bull & Bear
Quality Growth Fund, dated February
15, 1996 and previously filed via
EDGAR, Accession Number
1005477-96-000001.
Pro Forma Financial Statements for
the Twelve Months Ended December
31, 1995 (filed herewith).
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.
PART A
<PAGE>
BULL & BEAR QUALITY GROWTH FUND
March ___, 1996
Fellow Shareholder:
Enclosed is the proxy statement and proxy card for a Special Meeting of
Shareholders of Bull & Bear Quality Growth Fund ("Growth Fund"). Please take
this opportunity to review the proxy statement and sign and return the proxy
card in the special window pouch inside the large mailing envelope. Your vote is
important and must be counted, no matter how many or how few shares you own. The
Board of Directors recommends that you vote in favor of the proposal.
About the Proposal
The Board of Directors is asking shareholders to approve a proposal that
Growth Fund reorganize and become part of Bull & Bear U.S. And Overseas Fund
("Acquiring Fund"). If the proposal is approved and implemented, each
shareholder of Growth Fund automatically would become a shareholder of Acquiring
Fund. The Board unanimously concluded that it is in the best interests of
shareholders of Growth Fund to combine with Acquiring Fund. The Board believes
that combining the Funds will benefit Growth Fund's shareholders by providing
them with a portfolio that has an investment objective similar to the investment
objective of Growth Fund, but with greater flexibility to achieve that
objective.
Your Vote is Important - Please Return the Proxy Card Promptly
Your vote is extremely important and I urge you to complete and return
promptly the proxy card using the enclosed postage paid envelope. If you have
any questions, please call our Shareholder Service Representatives at
1-800-847-4200, who will be happy to assist you.
Sincerely,
Thomas B. Winmill
Co-President
<PAGE>
BULL & BEAR QUALITY GROWTH FUND
11 HANOVER SQUARE
NEW YORK, NEW YORK 10005
---------------------------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
to be held on April 25, 1996
---------------------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Bull &
Bear Quality Growth Fund ( the "Fund") will be held at the offices of the Fund
at 11 Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, for the following purposes:
1. Approval of an Agreement and Plan of Reorganization and
Termination; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are entitled to vote at the meeting and any adjournment thereof if
you owned Fund shares at the close of business on February 15, 1996. If you do
not expect to attend the meeting, please complete, date, sign and return the
enclosed proxy card in the enclosed postage paid envelope.
By order of the Board of Directors,
William J. Maynard
Secretary
March , 1996
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
In order to avoid the additional expense of further solicitations, we ask your
cooperation in mailing in your proxy card promptly if you do not expect to
attend the meeting. No postage is necessary.
<PAGE>
BULL & BEAR U.S. AND OVERSEAS FUND
BULL & BEAR QUALITY GROWTH FUND
(each a series of Bull & Bear Funds I, Inc.)
11 Hanover Square
New York, New York 10005
1-800-847-4200
---------------------------------
PROSPECTUS/PROXY STATEMENT
March __, 1996
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished
to shareholders of Bull & Bear Quality Growth Fund ("Growth Fund") in connection
with the solicitation of proxies by the board of directors of Bull & Bear Funds
I, Inc. (the "Corporation"), on behalf of Growth Fund, for use at a special
meeting of shareholders to be held at the offices of the Corporation at 11
Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, and at any adjournment thereof ("Meeting").
As more fully described in this Proxy Statement, the purpose of the
Meeting is to vote on a proposed reorganization ("Reorganization"). Under the
Reorganization, Bull & Bear U.S. and Overseas Fund ("Acquiring Fund"), a series
of the Corporation, would acquire the assets of Growth Fund in exchange solely
for shares of common stock of Acquiring Fund and the assumption by Acquiring
Fund of Growth Fund's liabilities. Those Acquiring Fund shares then would be
distributed to Growth Fund's shareholders so that each such shareholder would
receive a number of full and fractional shares of Acquiring Fund having an
aggregate net asset value that, on the effective date of the Reorganization, is
equal to the aggregate net asset value of the shareholder's shares in Growth
Fund. As soon as practicable following these distributions, Growth Fund will be
terminated.
Acquiring Fund is a non-diversified series of the Corporation, an
open-end management investment company. Acquiring Fund's investment objective 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 foreign issuers.
This Proxy Statement, which should be retained for future reference,
sets forth concisely the information about the Reorganization and Acquiring Fund
that a shareholder should know before voting. This Proxy Statement is
accompanied by the Prospectus of Acquiring Fund dated May 1, 1995, and Acquiring
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
1995, which are incorporated by reference into this Proxy Statement. A Statement
of Additional Information dated March , 1996 relating to the Reorganization and
including Acquiring Fund's and Growth Fund's Annual Reports to Shareholders for
the fiscal year ended December 31, 1995 and pro forma financial statements, and
a Statement of Additional Information with respect to Acquiring Fund, dated May
1, 1995 have been filed with the Securities and Exchange Commission ("SEC") and
are incorporated herein by this reference. The Prospectus of Growth Fund, dated
May 1, 1995, and Statement of Additional Information also dated May 1, 1995,
have been filed with the SEC and are incorporated herein by this reference.
Copies of these documents may be obtained free of charge by contacting your
Investor Service Representative toll-free at 1-800-847-4200.
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- 1 -
<PAGE>
TABLE OF CONTENTS
VOTING INFORMATION.......................................................... 1
SYNOPSIS.................................................................... 2
COMPARISON OF PRINCIPAL RISK FACTORS........................................ 7
THE PROPOSED TRANSACTION.................................................... 8
ADDITIONAL INFORMATION ABOUT ACQUIRING FUND................................ 11
MISCELLANEOUS.............................................................. 12
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION......... A-1
- i -
<PAGE>
BULL & BEAR QUALITY GROWTH FUND
11 HANOVER SQUARE
NEW YORK, NEW YORK 10005
PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders
to be Held on April 25, 1996
---------------------------------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished
to shareholders of Bull & Bear Quality Growth Fund ("Growth Fund") in connection
with the solicitation of proxies by the board of directors of Bull & Bear Fund
I, Inc. (the "Corporation"), on behalf of Growth Fund, for use at a special
meeting of shareholders of Growth Fund to be held at the offices of Growth Fund
at 11 Hanover Square, New York, New York 10005, on April 25, 1996, at 11:00 a.m.
Eastern time, and at any adjournment thereof ("Meeting"). This Proxy Statement
will first be mailed to shareholders on or about March ___, 1996.
At least one-third of the shares of Growth Fund outstanding on February
15, 1996, represented in person or by proxy, must be present for the transaction
of business by Growth Fund at the Meeting. If a quorum is not present at the
Meeting or a quorum is present but sufficient votes to approve the proposal are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares represented at
the Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR any such proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST any such
proposal against such adjournment.
Abstentions and broker non-votes will be counted as shares present for
purposes of determining whether a quorum is present but will not be voted for or
against any adjournment or proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against any proposal
where the required vote is a percentage of the shares present or outstanding.
Abstentions and broker non-votes will not be counted, however, as votes cast for
purposes of determining whether sufficient votes have been received to approve a
proposal. Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
Agreement and Plan of Reorganization and Termination dated as of February 20,
1996 (the "Reorganization Plan") which is attached to this Proxy Statement as
Appendix A. Under the Reorganization Plan, Bull & Bear U.S. and Overseas Fund
("Acquiring Fund"), a series of the Corporation, would acquire the assets of
Growth Fund in exchange solely for shares of common stock of Acquiring Fund and
the assumption by Acquiring Fund of Growth Fund's liabilities; those shares then
would be distributed to Growth Fund's shareholders. ("Acquiring Fund" and
"Growth Fund" may be referred to herein individually as a "Fund" or,
collectively, as "Funds.") After completion of the Reorganization, Growth Fund
would be terminated.
In addition, if you sign, date and return the enclosed proxy card, but
give no voting instructions, the duly appointed proxies may, in their
discretion, vote upon such other matters as may come before the Meeting. The
proxy card may be revoked by giving another proxy or by letter or telegram
revoking such proxy. To be effective, such revocation must be received by the
Corporation prior to the Meeting and must indicate your name and account number.
In addition, if you attend the Meeting in person you may, if you wish, vote by
ballot at the Meeting, thereby canceling any proxy previously given.
<PAGE>
As of February 15, 1996 (the "Record Date"), Growth Fund had
________.___ shares of common stock outstanding. The solicitation of proxies,
the cost of which will be borne by Bull & Bear Advisers, Inc. (the "Investment
Manager"), will be made primarily by mail but also may include telephone or oral
communications by representatives of the Investment Manager, who will not
receive any compensation therefor from the Funds, or by Shareholder
Communications Corporation, professional proxy solicitors retained by the
Corporation, who will be paid fees and expenses of up to approximately $______
for soliciting services. [Management does not know of any single shareholder or
"group" (as that term is used in Section 13(d) of the Securities Exchange Act of
1934) who beneficially owns 5% or more of the shares of either Growth Fund or
Acquiring Fund as of the Record Date. Directors and officers of the Corporation
own in the aggregate less than 1% of the shares of Acquiring Fund.]
Under Maryland law, the affirmative vote of a majority of the
outstanding shares of Growth Fund entitled to vote at the Meeting is required to
approve the Reorganization. Each outstanding full share of Growth Fund is
entitled to one vote, and each outstanding fractional share of Growth Fund is
entitled to a proportionate share of one vote. Although the shareholders of
Growth Fund may exchange or redeem out of the Fund, they do not have appraisal
rights.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Prospectuses of the Funds (which are incorporated
herein by reference), and the Reorganization Plan. Shareholders should read this
Prospectus/Proxy Statement and the Prospectus of Acquiring Fund carefully. As
discussed more fully below, the board of directors of the Corporation believes
that the Reorganization will benefit Growth Fund's shareholders. Acquiring Fund
has an investment objective similar to the investment objective of Growth Fund,
although its investment policies and strategies differ from those of Growth Fund
in some respects. It is anticipated that, following the Reorganization, Growth
Fund's shareholders will, as shareholders of Acquiring Fund, be subject to
comparable total operating expenses as a percentage of net assets as those
experienced by Growth Fund during its fiscal year ended December 31, 1995.
The Reorganization
The board of directors of the Corporation voted to approve the
Reorganization Plan at a meeting held on February 15, 1996. The Reorganization
Plan provides for the acquisition by Acquiring Fund of the assets of Growth Fund
in exchange solely for shares of Acquiring Fund and the assumption by Acquiring
Fund of the liabilities of Growth Fund. Growth Fund then will distribute the
Acquiring Fund shares to its shareholders, so that each shareholder will receive
the number of full and fractional shares of Acquiring Fund that is equal in
value to such shareholder's holdings in Growth Fund as of the Closing Date
(defined below). Growth Fund then will be terminated as soon as practicable
thereafter.
The exchange of Growth Fund's assets for Acquiring Fund shares and
Acquiring Fund's assumption of Growth Fund's liabilities will occur at or as of
4:00 p.m., Eastern time, on April 26, 1996, or such later date as the conditions
to the closing are satisfied ("Closing Date").
For the reasons set forth below under "The Proposed Transaction --
Reasons for the Reorganization," the board of directors of the Corporation, on
behalf of Growth Fund, including the directors who are not "interested persons,"
as that term is defined in the Investment Company Act of 1940 ("1940 Act") (the
"Independent Directors"), has determined that the Reorganization is in the best
interests of Growth Fund, that the terms of the Reorganization are fair and
reasonable and that the interests of Growth Fund's shareholders will not be
diluted as a result of the Reorganization. Accordingly, the board of directors
of the Corporation, on behalf of Growth Fund, recommends approval of the
Reorganization. In addition, the board of directors of the Corporation, on
behalf of Acquiring Fund, including its Independent Directors, has determined
that the Reorganization is in the best interests of Acquiring Fund, that the
terms of the Reorganization are fair and reasonable and that the interests of
Acquiring Fund's shareholders will not be diluted as a result of the
Reorganization.
COMPARATIVE FEE TABLE
Reorganization of Growth Fund into Acquiring Fund
Certain fees and expenses that Growth Fund's shareholders pay, directly
or indirectly, are different from those incurred by Acquiring Fund shareholders.
Until Growth Fund's net assets reach $5 million, the Investment Manager
- 2 -
<PAGE>
receives no fee for its services as Growth Fund's investment manager.
Thereafter, the Investment Manager is paid a fee for its investment management
services at the annual rate of 1.00% of Growth Fund's average daily net assets
up to $10 million, 7/8th of 1% over $10 million up to $30 million, 3/4th of 1%
over $30 million up to $150 million, 5/8th of 1% over $150 million up to $500
million, and 1/2 of 1% over $500 million. With respect to Acquiring Fund, the
Investment Manager is paid a fee for its investment management services at the
annual rate of 1.00% of Acquiring Fund's average daily net assets up to $10
million, 7/8th of 1% over $10 million up to $30 million, 3/4th of 1% over $30
million up to $150 million, 5/8th of 1% over $150 million up to $500 million,
and 1/2 of 1% over $500 million. These fees are higher than those paid by most
investment companies.
The following tables show (1) transaction expenses currently incurred by
shareholders of Acquiring Fund and Growth Fund and transaction expenses that
each shareholder will incur after giving effect to the Reorganization; (2) the
current fees and expenses incurred by the shares of Growth Fund and Acquiring
Fund for the fiscal year ended December 31, 1995; and (3) pro forma fees for
Acquiring Fund shares after giving effect to the Reorganization.
Shareholder Transaction Expenses
Acquiring Combined
Growth Fund Fund Fund
----------- --------- --------
Sales load imposed on purchases NONE NONE NONE
Sales load imposed on reinvested
dividends NONE NONE NONE
Deferred sales load NONE NONE NONE
Redemption fee within 30 days of 1.00% 1.00% 1.00%
purchase
Redemption fee after 30 days of NONE NONE NONE
purchase
Exchange fee NONE NONE NONE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Acquiring Combined Fund
Growth Fund(1)(2) Fund(2) (Pro Forma)
----------------- ------- -----------
Management Fees(2) 0.00% 0.99% 0.97%
(after reimbursement)
12b-1 Fees(3) 1.00% 1.00% 1.00%
Other Expenses(4) 2.71% 1.56% 1.56%
Total Fund Operating Expenses 3.71% 3.55% 3.53%
(after reimbursement)
(1) The percentages given for Growth Fund's annual fund operating expenses are
based on an assumed level of average net assets of $2.2 million.
(2) Without the Investment Manager's expense guarantee, investment management
fees and certain operating expenses for Acquiring Fund and Growth Fund would
have been higher. For Acquiring Fund, investment management fees would have been
1.00% and total operating expenses would have been 3.84% of average net assets,
respectively. For Growth Fund, other expenses would have been 3.30% and total
operating expenses would have been 4.30% of average net assets, respectively.
- 3 -
<PAGE>
(3) 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.
(4) "Other Expenses" include amounts (a) paid to each Fund's custodian and to
each Fund's transfer agent and (b) reimbursable to the Investment Manager and
each Fund's distributor for certain administrative and shareholder services, and
does not include interest expense from each Fund's bank borrowings.
Example of Effect of Fund Expenses
The following illustrates the expenses on a $1,000 investment under the
fees and expenses stated above, assuming a 5% annual return and a redemption at
the end of each time period.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Growth Fund $37 $113 $192 $396
Acquiring Fund $36 $109 $184 $382
Combined Fund $36 $108 $183 $380
This Example assumes the reinvestment of all dividends and other
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). The example is an illustration only
and should not be considered an indication of past or future returns or
expenses. Actual returns and expenses may be greater or less than those shown.
Form of Organization
Acquiring Fund and Growth Fund are each series of the Corporation, an
open-end management investment company organized as a Maryland corporation. The
Corporation was organized under the laws of Maryland in 1986. Prior to September
23, 1993, the Corporation operated under the name Bull & Bear U.S. and Overseas
Fund Ltd. The Corporation is authorized to issue up to 1 billion shares ($.01
par value), 250 million shares of which have been designated to Acquiring Fund
and 250 million shares of which have been designated to Growth Fund. The
Corporation's board of directors may establish one or more other series,
although it has no current intention of doing so.
Each Fund's shares are 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.
Neither Fund holds shareholder meetings annually except as required by
law. Stock certificates for either Fund will be issued only for full shares when
requested in writing.
Investment Objectives and Policies
The Funds have similar investment objectives, although their investment
policies differ in some respects. The investment objective and certain
investment policies of each Fund are set forth below. There can be no assurance
that either Fund will achieve its investment objective, and each Fund's net
asset value fluctuates based upon changes in the value of its portfolio
securities.
Acquiring Fund. The investment objective of Acquiring 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.
- 4 -
<PAGE>
Acquiring 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 or
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.
Acquiring 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.
There are no limitations on the relative amounts of the Fund's assets that may
be invested in any one country.
When seeking income, Acquiring Fund will normally invest in investment
grade fixed income securities of varying maturities, depending upon 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 invest without
limit in unrated securities. For temporary defensive purposes, the Fund may
invest all or a portion of its assets in high grade fixed income securities.
Growth Fund. 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. Under normal 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.
In addition to the type of common stocks described above, Growth 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 or domestic issuers, and common stocks of domestic or foreign issuers
that do not have the characteristics set forth in the Fund's principal
investment policy. The Fund may invest without limit in high grade debt
securities, securities of the U.S. Government, its agencies or
instrumentalities, and money market 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.
The Growth Fund may employ the following other investment strategies in
seeking to achieve its investment objectives, although it has no 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.
Other Policies. Each Fund may borrow money from banks for temporary or
emergency purposes and engage in reverse repurchase agreements, but not in
excess of an amount equal to one-third of the Fund's total assets. Acquiring
Fund has no current intention of engaging in reverse repurchase agreements.
Acquiring Fund may engage in short sales "against the box."
Operations of Acquiring Fund Following the Reorganization
While there are differences in the Funds' investment policies, it is not
expected that Acquiring Fund will revise its investment policies following the
Reorganization to reflect those of Growth Fund. Because Growth Fund is permitted
to invest in securities having characteristics different from those permitted
for Acquiring Fund, certain of the securities currently held in Growth Fund's
portfolio may need to be sold, rather than transferred to Acquiring Fund. If the
Reorganization is approved, Growth Fund may sell prior to the effective date of
the Reorganization any assets if necessary that are inconsistent with the
investment policies of Acquiring Fund, and the proceeds thereof will be held in
temporary investments or reinvested in assets that qualify to be held by
Acquiring Fund. The necessity for Growth Fund to dispose of assets prior to the
effective date of the Reorganization may result in selling securities at a
disadvantageous time and could result in Growth Fund's realizing losses that
would not otherwise have been realized.
- 5 -
<PAGE>
Following the Reorganization, the directors and officers of the
Corporation, the Investment Manager and Acquiring Fund's distributor and other
outside agents will continue to serve Acquiring Fund in their current
capacities. Acquiring 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 the Investment Manager. Mr. Sneed was formerly Vice President of
Morgan Stanley Asset Management, Inc., a security analyst with Argus Research
and a portfolio manager and member of the finance and investment committees of
American International Group, Inc., a major insurance company. A graduate of
Columbia College, Mr. Sneed is a Chartered Financial Analyst and a member of the
New York Society of Security Analysts.
Purchases, Redemptions and Exchanges
Shares of each Fund are available through Investor Service Center, Inc.,
each Fund's distributor (the "Distributor"). The minimum initial investment in
either Fund is $1,000 for regular and gifts/transfers to minors custody
accounts, and $500 for Bull & Bear retirement plans. The minimum subsequent
investment is $100. The initial investment minimums may be waived under some
circumstances.
Shares of each Fund may be redeemed at their particular net asset value
per share next determined after receipt of the redemption request in proper
form. Payment for shares redeemed will be made as soon as possible, ordinarily
within seven days after receipt of the redemption request in proper form.
Shares of either Fund with a value of at least $500 may be exchanged 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).
If the Reorganization is approved, Growth Fund shares will cease to be
offered on ___________, 1996, so that shares of Growth Fund will no longer be
available for purchase or exchange thereafter. If the Meeting is adjourned and
the Reorganization is approved on a later date, Growth Fund shares will no
longer be available for purchase or exchange on the next business day following
the date on which the Reorganization is approved and all contingencies have been
met. Redemptions of Growth Fund's shares and exchanges of such shares for shares
of other Bull & Bear Funds may be effected through the Closing Date.
Distributions
Each Fund pays dividends annually to its shareholders from its net
investment income, if any. Each 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. Each
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains.
On or before the Closing Date, Growth Fund will declare a dividend of
substantially all of its net investment income and a distribution of
substantially all of its net capital gain (the excess of net long term capital
gain over net short term capital loss), net short-term capital gain and net
foreign currency gains, if any, and distribute those amount plus any previously
declared but unpaid dividends, in order to continue to maintain its tax status
as a regulated investment company. Such distributions are expected to be fully
taxable, with the portion thereof attributable to net capital gain being treated
as long term capital gains by shareholders who hold their Growth Fund shares as
capital assets.
Federal Income Tax Consequences of the Reorganization
The Corporation, on behalf of each Fund, has received an opinion of
Kirkpatrick & Lockhart LLP, its counsel, to the effect that the Reorganization
will constitute a tax-free reorganization within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code").
Accordingly, no gain or loss will be recognized to either Fund or its
shareholders as a result of the Reorganization. See "The Proposed
Transaction--Federal Income Tax Considerations."
- 6 -
<PAGE>
COMPARISON OF PRINCIPAL RISK FACTORS
Because the Funds' investment policies and strategies differ, the Funds'
investment risks also differ. Certain differences between the two Funds are
identified below. See the Acquiring Fund Prospectus for a more detailed
discussion of the investment risks of Acquiring Fund, and see the Growth Fund
Prospectus for a more detailed discussion of the risks of Growth Fund.
Foreign Investing. Acquiring Fund may invest without limit in foreign
securities. In contrast, Growth Fund has no current intention of investing more
than 5% of its total assets in such securities. 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.
Fixed Income Investing. Each Fund may invest up to 35% of its assets in
fixed income securities rated below investment grade, although neither Fund has
any current intention of investing more than 5% of its assets in such securities
during the coming year. Investment grade securities are those rated in the top
four categories by a nationally recognized statistical rating organization such
as Standard & Poor's Ratings Services 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.
Hedging and Income Strategies. Each Fund may engage in options, futures
and forward currency transactions to hedge or to enhance return, although Growth
Fund has no current intention of involving more than 5% of its total assets in
any one such strategy. There can be no assurance that any strategy employing
these instruments 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 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 instru ments 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.
Repurchase Agreements. Each Fund may enter into repurchase agreements
with U.S. banks or dealers involving securities in which the Fund is authorized
to invest. To attempt to limit the risk of engaging in repurchase agreements,
each Fund enters into repurchase agreements only with banks and dealers believed
by the Investment Manager to present minimal credit risks in accordance with
guidelines established by its board of directors. Each 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.
- 7 -
<PAGE>
Other Information. Each Fund is "non-diversified," as defined in the
1940 Act, but intends to continue to qualify as a regulated investment company
for Federal income tax purposes. This means, in general, that more than 5% of
each 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
each 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 each 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), each
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 PROPOSED TRANSACTION
Reorganization Plan
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
The Reorganization Plan contemplates (1) Acquiring Fund's acquiring on
the Closing Date the assets of Growth Fund in exchange solely for shares of
Acquiring Fund and the assumption by Acquiring Fund of Growth Fund's liabilities
and (2) the constructive distribution of such shares of Acquiring Fund to the
shareholders of Growth Fund.
The assets of Growth Fund to be acquired by Acquiring Fund include all
cash, cash equivalents, securities, receivables and other property owned by
Growth Fund. Acquiring Fund will assume from Growth Fund all debts, liabilities,
obligations and duties of Growth Fund of whatever kind or nature; provided,
however, that Growth Fund will use its best efforts, to the extent practicable,
to discharge all of its known debts, liabilities, obligations and duties prior
to the Closing Date. Acquiring Fund also will deliver to Growth Fund shares of
Acquiring Fund, which then will be constructively distributed to Growth Fund's
shareholders. Growth Fund will be terminated as soon as practicable thereafter.
The value of Growth Fund's assets to be acquired, and the amount of its
liabilities to be assumed, by Acquiring Fund and the net asset value of a share
of Acquiring Fund will be determined as of the close of regular trading on the
NYSE on the Closing Date. 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 Corporation's board of
directors.
On, or as soon as practicable after the Closing Date, Growth Fund will
distribute pro rata to its shareholders of record the shares of Acquiring Fund
it received so that each Growth Fund shareholder will receive a number of full
and fractional shares of Acquiring Fund equal in value to the shareholder's
holdings in Growth Fund. Such distribution will be accomplished by opening
accounts on the books of Acquiring Fund in the names of Growth Fund's
shareholders and by transferring thereto the shares of Acquiring Fund previously
credited to the account of Growth Fund on those books.
Fractional shares of Acquiring Fund will be rounded to the third decimal place.
Accordingly, immediately after the Reorganization, each former
shareholder of Growth Fund will own shares of Acquiring Fund that will be equal
in value to that shareholder's shares of Growth Fund immediately prior to the
Reorganization. Moreover, because shares of Acquiring Fund will be issued at net
asset value in exchange for the net assets of Growth Fund, the aggregate value
of Acquiring Fund shares so issued will equal the aggregate value of Growth Fund
shares. The net asset value per share of Acquiring Fund will be unchanged by the
transaction. Thus, the Reorganization will not result in a dilution of any
shareholder's interest.
Any transfer taxes payable upon issuance of shares of Acquiring Fund in
a name other than that of the registered holder of the shares on the books of
Growth Fund shall be paid by the person to whom such shares are to be issued as
a condition of such transfer. Any reporting responsibility of Growth Fund will
continue to be its responsibility up to and including the Closing Date and such
later date on which it is terminated.
- 8 -
<PAGE>
The cost of the Reorganization, including professional fees and the cost
of soliciting proxies for the Meeting, consisting principally of printing and
mailing expenses, together with the cost of any supplementary solicitation, will
be borne by the Investment Manager.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
Growth Fund or Acquiring Fund. In addition, the Reorganization Plan may be
amended in any mutually agreeable manner, except that no amendment may be made
subsequent to the Meeting that would have a material adverse effect on the
shareholders' interests.
Reasons for the Reorganization
The board of directors of the Corporation, on behalf of Growth Fund,
including a majority of its Independent Directors, has determined that the
Reorganization is in the best interests of Growth Fund, that the terms of the
Reorganization are fair and reasonable and that the interests of Growth Fund's
shareholders will not be diluted as a result of the Reorganization. The board of
directors of the Corporation, on behalf of Acquiring Fund, including a majority
of its Independent Directors, has determined that the Reorganization is in the
best interests of Acquiring Fund, that the terms of the Reorganization are fair
and reasonable and that the interests of Acquiring Fund's shareholders will not
be diluted as a result of the Reorganization.
In considering the Reorganization, the Corporation's board of directors
made an extensive inquiry into a number of factors, including the following:
(1) the similarity of the investment objectives, policies and
restrictions of the Funds;
(2) the effect of the Reorganization on expected investment
performance;
(3) the effect of the Reorganization on the expense ratio of
Acquiring Fund (after the Reorganization) relative to each
Fund's current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including
continuing to operate on a stand-alone basis or liquidation; and
(7) the potential benefits of the Reorganization to other persons,
especially the Investment Manager and its affiliates.
The Reorganization was recommended to the board of directors of the
Corporation by the Investment Manager at a meeting of the board of directors
held on February 15, 1996. The board was advised by Investment Manager that the
Funds have similar investment objectives. The Investment Manager noted, however,
that the investment policies of Acquiring Fund differ from those of Growth Fund
in that, among other things, Acquiring Fund may invest without limit in foreign
securities. In approving the proposed transactions, the board of directors took
into account the Investment Manager's opinion that Acquiring Fund's objective of
seeking 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 remains an appropriate one to offer to investors as
part of an overall investment strategy. The Investment Manager further advised
the board that, while past performance is no guarantee of future results,
Acquiring Fund has experienced better investment performance on average than
Growth Fund during the recent time period. The Investment Manager also advised
the board that Growth Fund's net assets have not increased as projected,
contributing to that Fund's relatively high expense ratios and creating
difficulties with respect to portfolio management. The Investment Manager
further noted that Growth Fund's high expense ratio hindered its performance and
made it more difficult for Growth Fund to increase its assets. The board was
further advised that the amount of expenses reimbursed by the Investment Manager
following the reorganization would be less than the amount it currently
reimburses for each Fund on a combined basis, thus benefitting the Investment
Manager, and that the costs of the Reorganization would be borne by the
Investment Manager.
In recommending the Reorganization, the Investment Manager advised the
board that combining the Funds would result in a comparable expense ratio for
Acquiring Fund shareholders as a percentage of net assets. The board was further
advised that the reorganization would be tax free. The board discussed the fact
that unrealized appreciation in Acquiring Fund assets could result in Growth
Fund shareholders experiencing taxable capital gains that they would otherwise
not have experienced. The board recognized, however, that whether or not such
gains would be realized was speculative.
- 9 -
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
OF GROWTH FUND VOTE "FOR" THE PROPOSED REORGANIZATION.
Description of Securities to be Issued
The Corporation is registered with the SEC as an open-end management
investment company. Its directors are authorized to issue 1 billion shares of
common stock of separate series (par value $.01 per share). The directors have
established Acquiring Fund as one of the Corporation's series. Each share in
Acquiring Fund represents an equal proportionate interest in Acquiring Fund with
each other share in the Fund. Shares of Acquiring Fund entitle their holders to
one vote per full share and fractional votes for fractional shares held. On the
Closing Date, Acquiring Fund will have outstanding one class of shares. Each
share of Acquiring Fund will be entitled to participate equally in dividends and
the proceeds of any liquidation.
The Corporation does not hold meetings of shareholders annually. There
will normally be no meetings of shareholders for the purpose of electing
directors unless fewer than a majority of the directors holding office has been
elected by shareholders, at which time the directors then in office will call a
shareholders' meeting for the election of directors. Under the 1940 Act,
shareholders of record of at least two-thirds of the outstanding shares of an
investment company may remove a director by votes cast in person or by proxy at
a meeting called for that purpose. The directors are required to call a meeting
of shareholders for the purpose of voting upon the question of removal of any
director when requested in writing to do so by the shareholders of record
holding at least 10% of the Corporation's outstanding shares.
Federal Income Tax Considerations
The exchange of Growth Fund's assets for shares of Acquiring Fund and
Acquiring Fund's assumption of Growth Fund's liabilities is intended to qualify
for federal income tax purposes as a tax-free reorganization under section
368(a)(1)(C) of the Code. The Corporation, on behalf of each Fund, has received
an opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the
effect that --
(1) Acquiring Fund's acquisition of Growth Fund's assets in exchange solely
for Acquiring Fund shares and Acquiring Fund's assumption of Growth
Fund's liabilities, followed by Growth Fund's distribution of those
shares pro rata to its shareholders constructively in exchange for their
Growth Fund shares, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of the
Code;
(2) No gain or loss will be recognized to Growth Fund on the transfer to
Acquiring Fund of its assets in exchange solely for Acquiring Fund
shares and Acquiring Fund's assumption of Growth Fund's liabilities or
on the subsequent distribution of those shares to Growth Fund's
shareholders in constructive exchange for their Growth Fund shares;
(3) No gain or loss will be recognized to Acquiring Fund on its receipt of
the transferred assets in exchange solely for Acquiring Fund shares and
its assumption of Growth Fund's liabilities;
(4) Acquiring Fund's basis for the transferred assets will be the same as
the basis thereof in Growth Fund's hands immediately before the
Reorganization, and Acquiring Fund's holding period for those assets
will include Growth Fund's holding period therefor;
(5) A Growth Fund shareholder will recognize no gain or loss on the
constructive exchange of all its Growth Fund shares solely for Acquiring
Fund shares pursuant to the Reorganization; and
(6) A Growth Fund shareholder's basis for the Acquiring Fund shares to be
received by it in the Reorganization will be the same as the basis for
its Growth Fund shares to be constructively surrendered in exchange for
those Acquiring Fund shares, and its holding period for those Acquiring
Fund shares will include its holding period for those Growth Fund
shares, provided they are held as capital assets by the shareholder on
the Closing Date.
Such opinion states that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset
(including certain options, futures, and forward contracts included in the
transferred assets) as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year (or on
the termination or transfer thereof) under a mark-to-market system of
accounting.
- 10 -
<PAGE>
Utilization by Acquiring Fund after the Reorganization of
pre-Reorganization capital losses realized by Growth Fund could be subject to
limitation in future years under the Code.
Acquiring Fund has more unrealized appreciation of investments and
foreign currencies per share than Growth Fund which, if realized, may result in
more taxable distributions to Growth Fund shareholders than otherwise.
Shareholders of Growth Fund should consult their tax advisers regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
Capitalization
The following table shows the capitalization of each Fund as of December
31, 1995 and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganization.
Growth Fund Acquiring Fund Combined
----------- -------------- --------
Net Assets $2,215,764 $9,807,779 $12,023,878
Net Asset Value Per Share $12.46 $8.36 $8.36
Shares Outstanding 177,817 1,173,429 1,438,473
ADDITIONAL INFORMATION ABOUT ACQUIRING FUND
Financial Highlights
Financial highlights are presented below for a share of capital stock
outstanding throughout each period for Acquiring Fund.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, 1995 Annual Reports 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,
----------------------------------------------------------
PER SHARE DATA* 1995 1994 1993 1992 1991
------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 7.08 $ 8.71 $ 7.59 $ 8.37 $ 7.62
------ ------ -------- ------- -------
Income from investment operations:
Net investment income (loss)................. (.23) (.13) (.20) .04 .07
Net realized and unrealized gain (loss) on 2.00 (1.01) 2.22 (.25) 1.64
------ ------ -------- ------- -------
investments....................................
Total from investment operations........... 1.77 (1.14) 2.02 (.21) 1.71
------ ------ -------- ------- -------
Less distributions:
Distributions from net realized gains on
investments.................................. (.49) (.49) (.90) (.57) (.96)
------ ------ -------- ------- -------
Net asset value at end of period............... $ 8.36 $ 7.08 $ 8.71 $ 7.59 $ 8.37
====== ====== ======== ======= =======
TOTAL RETURN................................... 25.11% (13.12)% 26.71% (2.57)% 22.55%
====== ====== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted).... $9,808 $8,454 $12,250 $9,229 $1,275
====== ====== ======== ======= =======
Ratio of expenses to average net assets (a) (b) 3.55% 3.53% 3.55% 3.56% 3.56%
------ ------ -------- ------- -------
Ratio of net investment income (loss) to average (2.85)% (1.65)% (2.36)% 0.51% 0.90%
------ ------ -------- ------- -------
net assets (c).................................
Portfolio turnover rate........................ 214% 212% 182% 175% 208%
------ ------ -------- ------- -------
</TABLE>
- --------
1/The selected per share data has been restated to reflect the 100% stock
dividend effective February 24, 1992.
- 11 -
<PAGE>
* Per share net investment income (loss) and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share. The
financial highlights for 1991 have been restated to reflect the 100% stock
dividend effective February 24, 1992.
(a) Ratio prior to reimbursement by the Investment Manager was 3.84%, 3.59%,
3.69%, 4.09% and 13.35% for the years ended December 31, 1995, 1994,
1993, 1992, and 1991, respectively.
(b) Ratio after the reduction of custodian fees under a custodian agreement
was 3.49%. Prior to 1995, such reductions were reflected in the expense
ratios.
(c) Ratio prior to reimbursement by the Investment Manager was (3.14)%,
(1.71)%, (2.50)%, (0.02)% and (8.89)% for the years ended December 31,
1995, 1994, 1993, 1992 and 1991, respectively.
MISCELLANEOUS
Available Information
Growth Fund and Acquiring Fund are each subject to the informational
requirements of the Securities Exchange Act of 1934 and the 1940 Act and in
accordance therewith file reports, proxy material and other information with the
SEC. Such reports, proxy material and other information can be inspected and
copied at the Public Reference Room maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
Legal Matters
Certain legal matters in connection with the issuance of Acquiring Fund
shares will be passed upon by Kirkpatrick & Lockhart LLP, counsel to the
Corporation.
Experts
The audited financial statements of Acquiring Fund and Growth Fund,
incorporated by reference herein and in each Fund's respective Statement of
Additional Information, have been audited by Tait, Weller & Baker, independent
accountants, whose reports thereon are included in the each Fund's Annual Report
to Shareholders for the fiscal year ended December 31, 1995. The financial
statements audited by Tait, Weller & Baker have been incorporated by reference
herein and in the Statement of Additional Information in reliance on their
reports given on their authority as experts in auditing and accounting.
- 12 -
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement")
is made as of February 20, 1996, between Bull & Bear Funds I, Inc.
("Corporation"), on behalf of Bull & Bear U.S. and Overseas Fund, a segregated
portfolio of assets ("series") thereof ("Acquiring Fund"), and the Corporation,
on behalf of Bull & Bear Quality Growth Fund, another series thereof ("Target").
(Acquiring Fund and Target are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund ("Acquiring Fund Shares") and the assumption by
Acquiring Fund of Target's liabilities, followed by the constructive
distribution of the Acquiring Fund Shares to the holders of shares of common
stock in Target ("Target Shares") in exchange therefor, all upon the terms and
conditions set forth herein. The foregoing transactions are referred to herein
as the "Reorganization." All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by the Corporation on its behalf.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and
fractional Acquiring Fund Shares determined by dividing the net value of
Target (computed as set forth in paragraph 2.1) by the net asset value
(computed as set forth in paragraph 2.2) ("NAV") of an Acquiring Fund
Share; and
(b) to assume all of Target's liabilities described in paragraph
1.3 ("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. Before the Effective Time, Target shall declare and pay to its
shareholders a dividend and/or other distribution in an amount large enough so
that it will have distributed substantially all (and in any event not less than
90%) of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring
A-1
<PAGE>
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective pro rata number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder. All outstanding
Target Shares, including any represented by certificates, shall simultaneously
be canceled on Target's share transfer records. Acquiring Fund will issue
certificates representing the Acquiring Fund Shares issued in connection with
the Reorganization only for full Acquiring Fund Shares when requested in
writing.
1.6. As soon as reasonably practicable after distribution of the
Acquiring Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a
series of the Corporation and any further actions shall be taken in connection
therewith as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares
in a name other than that of the registered holder on Target's books of the
Target Shares constructively exchanged therefor shall be paid by the person to
whom such Acquiring Fund Shares are to be issued, as a condition of such
transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a)
the value of the Assets computed as of 4:00 p.m. on the date of the Closing
("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund
Share shall be computed as of the Valuation Time, using the valuation procedures
set forth in Acquiring Fund's then-current prospectus and statement of
additional information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made
by or under the direction of the Corporation's Board of Directors.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
April 26, 1996, or at such other place and/or on such other date as the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of 4:00 p.m. on the date thereof or at such other time as the
parties may agree ("Effective Time"). If, immediately before the Valuation Time,
(a) the New York Stock Exchange, Inc. ("NYSE") is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall
be postponed until the first business day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
3.2. The Corporation shall deliver at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Target's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. The Corporation shall deliver at the Closing a list of the names
and addresses of the Shareholders and the number of outstanding Target Shares
owned by each Shareholder, all as of the Effective Time, certified by the
Corporation's Secretary or Assistant Secretary. The Transfer Agent shall deliver
at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. The Corporation shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited to Target at the Effective Time or provide evidence that such Acquiring
Fund Shares have been credited to Target's account on Acquiring Fund's books.
The
A-2
<PAGE>
Corporation shall deliver at the Closing such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as may reasonably
be required.
3.4. The Corporation shall deliver at the Closing a certificate executed
in its name by a Co-President or a Vice President dated the Effective Time, to
the effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland,
and a copy of its Articles of Incorporation is on file with the
Department of Assessments and Taxation of Maryland ("Department");
4.1.2. The Corporation is duly registered as an open-end
management investment company under the Investment Company Act of 1940
("1940 Act"), and such registration will be in full force and effect at
the Effective Time;
4.1.3. Target is a duly established and designated series of the
Corporation;
4.1.4. At the Closing, Target will have good and marketable
title to the Assets and full right, power, and authority to sell,
assign, transfer, and deliver the Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets, Acquiring
Fund will acquire good and marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable
requirements of the Securities Act of 1933 ("1933 Act") and the 1940 Act
and the rules and regulations thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby by Target will not conflict with or violate,
Maryland law or any provision of the Corporation's Articles of
Incorporation or By-Laws or of any agreement, instrument, lease, or
other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a
party or by which it is bound, except as previously disclosed in writing
to and accepted by the Corporation on behalf of Acquiring Fund;
4.1.7. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, all material contracts and
other commitments of or applicable to Target (other than this Agreement
and investment contracts, including options, futures and forward
contracts) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the
Effective Time, without either Fund's incurring any liability or penalty
with respect thereto and without diminishing or releasing any rights
Target may have had with respect to actions taken or omitted to be taken
by any other party thereto prior to the Closing;
4.1.8. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental body
is presently pending or (to Target's knowledge) threatened against the
Corporation with respect to Target or any of its properties or assets
that, if adversely determined, would materially and adversely affect
Target's financial condition or the conduct of its business; Target
knows of no facts that might form the basis for the institution of any
such litigation, proceeding, or investigation and is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially or adversely affects its business
or its ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this
Agreement by Target have been duly authorized as of the date hereof by
all necessary action on the part of the Corporation's board of
directors, which has made
A-3
<PAGE>
the determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to approval by Target's shareholders and receipt of any
necessary exemptive relief or no-action assurances requested from the
Securities and Exchange Commission ("SEC") or its staff with respect to
sections 17(a) and 17(d) of the 1940 Act, this Agreement will constitute
a valid and legally binding obligation of Target, enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by
general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target, except for (a) the filing with the SEC of a
registration statement by the Corporation on Form N-14 relating to the
Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus/proxy statement ("Proxy Statement"), (b) receipt of any
necessary exemptive relief referenced in subparagraph 4.1.9, and (c)
such consents, approvals, authorizations, and filings as have been made
or received or as may be required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at
the time of the shareholders' meeting referred to in paragraph 5.2, and
at the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act, the
1934 Act, and the 1940 Act and the regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made in
reliance on and in conformity with information furnished by the
Corporation with respect to Acquiring Fund for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary
course of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since
it commenced operations and will continue to meet all the requirements
for such qualification for its current taxable year; and it has no
earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it. The Assets shall be
invested at all times through the Effective Time in a manner that
ensures compliance with the foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested
in the stock and securities of any one issuer, and not more than 50% of
the value of such assets is invested in the stock and securities of five
or fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably
practicable after the Reorganization, but in all events within six
months after the Effective Time.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland,
and a copy of its Articles of Incorporation is on file with the
Department;
4.2.2. The Corporation is duly registered as an open-end
management investment company under the 1940 Act, and such registration
will be in full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated
series of the Corporation;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization;
A-4
<PAGE>
4.2.5. The Acquiring Fund Shares to be issued and delivered to
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and
validly issued and outstanding shares of Acquiring Fund, fully paid and
non-assessable. Except as contemplated by this Agreement, Acquiring Fund
does not have outstanding any options, warrants, or other rights to
subscribe for or purchase any of its shares, nor is there outstanding
any security convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of
additional information conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution
and delivery of this Agreement and consummation of the transactions
contemplated hereby by Acquiring Fund will not conflict with or violate,
Maryland law or any provision of the Corporation's Articles of
Incorporation or By-Laws or of any provision of any agreement,
instrument, lease, or other undertaking to which Acquiring Fund is a
party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Acquiring Fund is a party or by which it is
bound, except as previously disclosed in writing to and accepted by the
Corporation on behalf of Target;
4.2.8. Except as otherwise disclosed in writing to and accepted
by the Corporation on behalf of Target, no litigation, administrative
proceeding, or investigation of or before any court or governmental body
is presently pending or (to Acquiring Fund's knowledge) threatened
against the Corporation with respect to Acquiring Fund or any of its
properties or assets that, if adversely determined, would materially and
adversely affect Acquiring Fund's financial condition or the conduct of
its business; Acquiring Fund knows of no facts that might form the basis
for the institution of any such litigation, proceeding, or investigation
and is not a party to or subject to the provisions of any order, decree,
or judgment of any court or governmental body that materially or
adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this
Agreement by Acquiring Fund have been duly authorized as of the date
hereof by all necessary action on the part of the Corporation's board of
directors, which has made the determinations required by Rule 17a-8(a)
under the 1940 Act; and, subject to receipt of any necessary exemptive
relief or no-action assurances requested from the SEC or its staff with
respect to sections 17(a) and 17(d) of the 1940 Act, this Agreement will
constitute a valid and legally binding obligation of Acquiring Fund,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act
for the execution or performance of this Agreement by Target, except for
(a) the filing with the SEC of the Registration Statement, (b) receipt
of any necessary exemptive relief referenced in subparagraph 4.2.9, and
(c) such consents, approvals, authorizations, and filings as have been
made or received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at
the time of the shareholders' meeting referred to in paragraph 5.2, and
at the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act, the
1934 Act, and the 1940 Act and the regulations thereunder and (b) not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading; provided that the foregoing shall
not apply to statements in or omissions from the Proxy Statement made in
reliance on and in conformity with information furnished by the
Corporation with respect to Target for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section
851(h)(2) of the Code; it qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all
the requirements for such qualification for its current taxable year;
Acquiring Fund intends to continue to meet all such requirements
A-5
<PAGE>
for the next taxable year; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M
of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue
additional Acquiring Fund Shares following the Reorganization except for
shares issued in the ordinary course of its business as a series of an
open-end investment company; nor does Acquiring Fund have any plan or
intention to redeem or otherwise reacquire any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, other than
through redemptions arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's
business in substantially the same manner that Target conducted that
business immediately before the Reorganization, (b) has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and
dispositions necessary to maintain its status as a RIC, and (c) expects
to retain substantially all the Assets in the same form as it receives
them in the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes necessary
to make dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than
25% of the value of Acquiring Fund's total assets (excluding cash, cash
items, and U.S. government securities) will be invested in the stock and
securities of any one issuer and (b) not more than 50% of the value of
such assets will be invested in the stock and securities of five or
fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly, nor
at the Effective Time will it own, directly or indirectly, nor has it
owned, directly or indirectly, at any time during the past five years,
any shares of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in
exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the
Acquiring Fund Shares to be received by them in the Reorganization and
(b) does not anticipate dispositions of those Acquiring Fund Shares at
the time of or soon after the Reorganization to exceed the usual rate
and frequency of dispositions of shares of Target as a series of an
open-end investment company. Consequently, its management expects that
the percentage of Shareholder interests, if any, that will be disposed
of as a result of or at the time of the Reorganization will be de
minimis. Nor does its management anticipate that there will be
extraordinary redemptions of Acquiring Fund Shares immediately following
the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the
parties incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by Acquiring
Fund and those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair market
value of the gross assets, held by Target immediately before the
Reorganization. For the purposes of this representation, any amounts
used by Target to pay its Reorganization expenses and redemptions and
distributions made by it
A-6
<PAGE>
immediately before the Reorganization (except for (a) distributions made
to conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax
and/or the excise tax under section 4982 of the Code and (b) redemptions
not made as part of the Reorganization) will be included as assets
thereof held immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who
is an employee of Target will be separate consideration for, or
allocable to, any of the Target Shares held by such
Shareholder-employee; none of the Acquiring Fund Shares received by any
such Shareholder-employee will be separate consideration for, or
allocable to, any employment agreement; and the consideration paid to
any such Shareholder-employee will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at
arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders
will not own shares constituting "control" of Acquiring Fund within the
meaning of section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that (a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations as are
contemplated by each Fund's normal business activities and (b) each Fund will
retain exclusive control of the composition of its portfolio until the Closing;
provided that Target shall not dispose of more than an insignificant portion of
its historic business assets during such period without Acquiring Fund's prior
consent.
5.2. Target covenants to call a shareholders' meeting to consider and
act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. The Corporation covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act, and
such state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.5. Subject to this Agreement, each Fund covenants to take or cause to
be taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Corporation's board of directors and shall
have been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
A-7
<PAGE>
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall
be pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. The Corporation (on behalf of Target) shall have received an
opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect
that:
6.4.1. Acquiring Fund is a duly established series of the
Corporation, a corporation duly organized and validly existing under the
laws of the State of Maryland with power under its Articles of
Incorporation to own all of its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently
conducted;
6.4.2. This Agreement (a) has been duly authorized, executed,
and delivered by the Corporation on behalf of Acquiring Fund and (b)
assuming due authorization, execution, and delivery of this Agreement by
the Corporation on behalf of Target, is a valid and legally binding
obligation of the Corporation with respect to Acquiring Fund,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to
the Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly
issued and outstanding and fully paid and non-assessable, and no
shareholder of Acquiring Fund has any preemptive right to subscribe for
or purchase such shares;
6.4.4. Acquiring Fund's execution and delivery of this Agreement
did not, and the consummation of the transactions contemplated hereby
will not, materially violate the Corporation's Articles of Incorporation
or ByLaws or any provision of any agreement (known to such counsel,
without any independent inquiry or investigation) to which the
Corporation (with respect to Acquiring Fund) is a party or by which it
is bound or (to the knowledge of such counsel, without any independent
inquiry or investigation) result in the acceleration of any obligation,
or the imposition of any penalty, under any agreement, judgment, or
decree to which the Corporation (with respect to Acquiring Fund) is a
party or by which it is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by the Corporation on
behalf of Target;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation
by the Corporation on behalf of Acquiring Fund of the transactions
contemplated herein, except such as have been obtained under the 1933
Act, the 1934 Act, and the 1940 Act and such as may be required under
state securities laws;
6.4.6. The Corporation is registered with the SEC as an
investment company, and to the knowledge of such counsel no order has
been issued or proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding,
or investigation of or before any court or governmental body is pending
or threatened as to the Corporation (with respect to Acquiring Fund) or
any of its properties or assets attributable or allocable to Acquiring
Fund and (b) the Corporation (with respect to Acquiring Fund) is not a
party to or subject to the provisions of any order, decree, or judgment
of any court or governmental body that materially and adversely affects
Acquiring Fund's business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by the Corporation on
behalf of Target.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and
A-8
<PAGE>
state law, and (iv) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. The Corporation (on behalf of Acquiring Fund) shall have received
an opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the
effect that:
6.5.1. Target is a duly established series of the Corporation, a
corporation duly organized and validly existing under the laws of the
State of Maryland with power under its Articles of Incorporation to own
all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed,
and delivered by the Corporation on behalf of Target and (b) assuming
due authorization, execution, and delivery of this Agreement by the
Corporation on behalf of Acquiring Fund, is a valid and legally binding
obligation of the Corporation with respect to Target, enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by
general principles of equity;
6.5.3. Target's execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will
not, materially violate the Corporation's Articles of Incorporation or
By-Laws or any provision of any agreement (known to such counsel,
without any independent inquiry or investigation) to which the
Corporation (with respect to Target) is a party or by which it is bound
or (to the knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which the Corporation (with respect to Target) is a party or by which it
is bound, except as set forth in such opinion or as previously disclosed
in writing to and accepted by the Corporation on behalf of Acquiring
Fund;
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation
by the Corporation on behalf of Target of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934
Act, and the 1940 Act and such as may be required under state securities
laws;
6.5.5. The Corporation is registered with the SEC as an
investment company, and to the knowledge of such counsel no order has
been issued or proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding,
or investigation of or before any court or governmental body is pending
or threatened as to the Corporation (with respect to Target) or any of
its properties or assets attributable or allocable to Target and (b) the
Corporation (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects its business,
except as set forth in such opinion or as otherwise disclosed in writing
to and accepted by the Corporation on behalf of Acquiring Fund.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. The Corporation shall have received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, as to the federal income tax consequences mentioned
below ("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as to
factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in a separate letter or certificate
addressed to such counsel) and the certificates delivered pursuant to paragraph
3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange
solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders
A-9
<PAGE>
constructively in exchange for the Shareholders' Target Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C)
of the Code, and each Fund will be "a party to a reorganization" within
the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the
transfer to Acquiring Fund of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities
or on the subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on
its receipt of the Assets in exchange solely for Acquiring Fund Shares
and its assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as
the basis thereof in Target's hands immediately before the
Reorganization, and Acquiring Fund's holding period for the Assets will
include Target's holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for
its Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective
Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset (including certain options, futures, and
forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the
foregoing conditions if, in the judgment of the Corporation's board of
directors, such waiver will not have a material adverse effect on its
shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by Bull & Bear Advisers, Inc. Such expenses
include: (a) expenses incurred in connection with entering into and carrying out
the provisions of this Agreement; (b) expenses associated with the preparation
and filing of the Registration Statement; (c) registration or qualification fees
and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which Target's shareholders are
resident as of the date of the mailing of the Proxy Statement to such
shareholders; (d) printing and postage expenses; (e) legal and accounting fees;
and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
A-10
<PAGE>
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed at
or prior to the Effective Time, (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before August 20, 1996; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of the Corporation, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Maryland; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its duly authorized officer.
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR U.S. AND OVERSEAS FUND
By: /s/ William J. Maynard /s/ Thomas B. Winmill
---------------------- ---------------------
Secretary Co-President
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR QUALITY GROWTH FUND
By: /s/ William J. Maynard /s/ Thomas B. Winmill
---------------------- ---------------------
Secretary Co-President
A-11
<PAGE>
PROXY
BULL & BEAR QUALITY GROWTH FUND
Series of Bull & Bear Funds I, Inc.
The undersigned hereby appoints Robert D. Anderson and Thomas B.
Winmill, and each of them, with full power of substitution, to vote as
designated below all shares of common stock of Bull & Bear Quality Growth Fund
series of Bull & Bear Funds I, Inc. (the "Fund") which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held on April 25,
1996 and any adjournment thereof, revoking all proxies heretofore given, upon
the proposals described in the proxy statement.
1. Approval of an Agreement and Plan of Reorganization and Termination
(Proposal 1)
|_| |_| |_|
FOR ABSTAIN AGAINST
2. To transact such other business as may properly come before the meeting
<PAGE>
THIS PROXY, IF PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR PROPOSAL 1. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
__________________________(L.S.)
Signature
__________________________(L.S.)
Signature
Dated _________________, 1996
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. IF SHARES ARE REGISTERED IN MORE
THAN ONE NAME, ALL SHOULD SIGN BUT IF
ONE SIGNS, IT BINDS THE OTHERS. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, AGENT, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY AN AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
TO AVOID EXPENSES OF ADJOURNING THE MEETING, PLEASE RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE>
BULL & BEAR FUNDS I, INC.
PART B
<PAGE>
BULL & BEAR U.S. AND OVERSEAS FUND
BULL & BEAR QUALITY GROWTH FUND
(each a series of Bull & Bear Funds I, Inc.)
11 Hanover Square
New York, New York 10005
(Toll Free) 1-800-847-4200
--------------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the proposed
reorganization whereby Bull & Bear U.S. and Overseas Fund ("Acquiring Fund"), a
series of Bull & Bear Funds I, Inc. (the "Corporation"), would acquire the
assets of Bull & Bear Quality Growth Fund ("Growth Fund"), another series of the
Corporation, in exchange solely for shares of common stock of Acquiring Fund and
the assumption by Acquiring Fund of Growth Fund's liabilities. This Statement of
Additional Information consists of this cover page and the following described
documents each of which is incorporated by reference herein:
(1) The Statement of Additional Information of Acquiring Fund dated
May 1, 1995 and previously filed via EDGAR, Accession Number
796532-95-000004.
(2) The Statement of Additional Information of Growth Fund dated May
1, 1995 and previously filed via EDGAR, Accession Number
796532-95-000004.
(3) The Annual Report to Shareholders of Acquiring Fund for fiscal
year ended December 31, 1995 and previously filed via EDGAR,
Accession Number 1005477-96-000002.
(4) The Annual Report to Shareholders of Growth Fund for fiscal year
ended December 31, 1995 and previously filed via EDGAR,
Accession Number 1005477-96-000001.
(5) Pro Forma Financial Statements for Growth Fund for the Twelve
Months Ended December 31, 1995 (filed herewith).
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Prospectus/Proxy Statement dated March ___,
1996 relating to the above described transaction. A copy of the Prospectus/Proxy
Statement may be obtained free of charge by contacting your Investor Service
Representative toll-free at 1-800-847-4200. This Statement of Additional
Information is dated March ___, 1996.
<PAGE>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
December 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
% Combined
US and Quality Pro forma US and Quality Pro forma Amount
Overseas Growth Combined Overseas Growth Combined of Total
Share Amount Share Amount Shares Market Value Market Value Value Investments
------------ ------------ ------ ------------ ------------ ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED STOCKS
Argentina
Buenos Aires Embotelladora ADR ............... 9,000 9,000 $ 185,625 $ 185,625 1.43%
------
Quilmes Industries S.A ....................... 11,000 11,000 171,600 171,600 1.33
----------- ----------- ------
357,225 357,225 2.76
----------- ----------- ------
Brazil
Telecomunicacoes
Brasileiras ADR ............................ 5,000 5,000 236,875 236,875 1.83
----------- ----------- ------
Canada
Mitel Corp.* ................................. 25,000 25,000 162,500 162,500 1.26
Seagrams Co. Ltd. ............................ 8,000 8,000 277,000 277,000 2.14
Tesco Corp.* ................................. 95,000 95,000 461,472 461,472 3.57
----------- ----------- ------
900,972 900,972 6.96
----------- ----------- ------
Germany
Moebel Walther Pfd.* ......................... 4,000 4,000 131,351 131,351 1.02
Sap A.G. Pfd. ................................ 4,000 4,000 608,687 608,687 4.70
----------- ----------- ------
740,038 740,038 5.72
----------- ----------- ------
Ireland
Elan Corp. PLC ADR* .......................... 9,000 9,000 437,625 437,625 3.38
----------- ----------- ------
Israel
Teva Pharmaceutical
Industries Ltd. ADR ........................ 5,000 5,000 231,875 231,875 1.79
----------- ----------- ------
Mexico
Grupo Televisa ............................... 9,000 9,000 202,500 202,500 1.57
----------- ----------- ------
Netherlands
Madge N.V.* .................................. 8,000 8,000 358,000 358,000 2.77
----------- ----------- ------
Norway
Nera AS - Telecom ADR* ....................... 8,000 8,000 260,000 260,000 2.01
----------- ----------- ------
Sweden
Volvo Akliebolaget ADR ....................... 9,000 9,000 185,343 185,343 1.43
----------- ----------- ------
United Kingdom
Reuters Holdings PLC ADR ..................... 5,000 5,000 275,625 275,625 2.13
J.D. Wetherspoon PLC Ord ..................... 45,373 45,373 452,260 452,260 3.50
----------- ----------- ------
727,885 727,885 5.63
----------- ----------- ------
United States
Abbott Laboratories .......................... 2,000 2,000 $ 83,500 83,500 0.65
Accent Software
International* ............................. 7,000 7,000 164,500 164,500 1.27
Allstate Corp. ............................... 2,000 2,000 82,250 82,250 0.64
AmeriCredit Corp.* ........................... 50,000 50,000 681,250 681,250 5.27
Ameridata Technologies Inc.* ................. 32,000 32,000 308,000 308,000 2.38
AMR Corp.* ................................... 1,000 1,000 74,250 74,250 0.57
Brite Voice Systems, Inc.* ................... 13,000 13,000 180,375 180,375 1.39
Cheyenne Software, Inc.* ..................... 10,000 10,000 261,250 261,250 2.02
Chrysler Corp. ............................... 1,500 1,500 83,063 83,063 0.64
</TABLE>
<PAGE>
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
December 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
% Combined
US and Quality Pro forma US and Quality Pro forma Amount
Overseas Growth Combined Overseas Growth Combined of Total
Share Amount Share Amount Shares Market Value Market Value Value Investments
------------ ------------ ------ ------------ ------------ ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Circon Corp.* ................................ 10,000 10,000 $ 202,500 $ 202,500 1.57%
Citicorp ..................................... 1,200 1,200 $ 80,700 80,700 0.62
Compaq Computer Corp.* ....................... 2,000 2,000 96,000 96,000 0.74
Du Pont (E.I.) De
Nemours & Co. .............................. 1,000 1,000 69,875 69,875 0.54
Federal National
Mortgage Association ....................... 1,000 1,000 124,125 124,125 0.96
Gillette Co. ................................. 2,000 2,000 104,250 104,250 0.81
Global Pharmaceutical Corp.* ................. 20,000 20,000 200,000 200,000 1.55
Goodyear Tire & Rubber Co. ................... 2,000 2,000 90,750 90,750 0.70
Healthsouth Corp.* ........................... 8,000 8,000 233,000 233,000 1.80
Hewlett-Packard Co. .......................... 1,000 1,000 83,750 83,750 0.65
Honeywell, Inc. .............................. 2,000 2,000 97,250 97,250 0.75
Loews Corp. .................................. 1,000 1,000 78,375 78,375 0.61
Longhorn Steaks Inc.* ........................ 14,000 14,000 248,500 248,500 1.92
McDonald's Corp. ............................. 2,000 2,000 90,250 90,250 0.70
Medisense Inc.* .............................. 7,000 7,000 221,375 221,375 1.71
Merck & Co., Inc. ............................ 1,000 1,000 65,750 65,750 0.51
Mercury Interactive Corp.* ................... 10,000 10,000 182,500 182,500 1.41
Minnesota Mining &
Manufacturing Co. .......................... 1,000 1,000 66,250 66,250 0.51
Mobile Telecommunication
Technologies Corp.* ........................ 8,000 8,000 171,000 171,000 1.32
Neoprobe Corp.* .............................. 18,000 18,000 290,250 290,250 2.24
Network Equipment
Technologies Inc.* ......................... 5,000 5,000 136,875 136,875 1.06
Newbridge Network Corp.* ..................... 5,500 5,500 227,563 227,563 1.76
Olicom A/S* .................................. 14,000 14,000 213,500 213,500 1.65
Pioneer Group Inc. ........................... 3,000 3,000 81,750 81,750 0.63
Platinum Technology Inc.* .................... 14,000 14,000 257,250 257,250 1.99
Procter & Gamble Co. ......................... 1,000 1,000 83,000 83,000 0.64
Raytheon Corp. ............................... 2,000 2,000 94,500 94,500 0.73
Renaissance Re Holdings Ltd. ................. 3,000 3,000 91,125 91,125 0.70
Schlumberger Ltd. ............................ 1,000 1,000 69,250 69,250 0.54
Schwab (Charles) Corp. ....................... 3,000 3,000 60,375 60,375 0.47
Sofamor/Denek Group, Inc.* ................... 8,000 8,000 227,000 227,000 1.75
Suncor Inc. .................................. 2,000 2,000 63,750 63,750 0.49
System Software
Associates, Inc. ........................... 19,500 19,500 424,125 424,125 3.28
Texas Instruments ............................ 1,500 1,500 77,625 77,625 0.60
Total Renal Care Holdings* ................... 10,000 10,000 295,000 295,000 2.28
20th Century Industries* ..................... 14,000 14,000 278,250 278,250 2.15
Utah Medical Products Inc.* .................. 14,000 14,000 277,375 277,375 2.14
Wilmington Trust Co. ......................... 3,000 3,000 92,625 92,625 0.72
----------- ---------- ----------- ------
5,681,438 2,084,388 7,765,826 60.02
----------- ---------- ----------- ------
Total Common Stocks ....................... 10,319,776 2,084,388 12,404,164 95.87
----------- ---------- ----------- ------
U.S. Government Agency Par Value Par Value Par Value
Federal National Mortgage --------- --------- ---------
Association, due 1/5/96 .................... 295,000 240,000 535,000 294,820 239,853 534,673 4.13
----------- ---------- ----------- ------
Total Investments ......................... $10,614,596 $2,324,241 $12,938,837 100.00%
=========== ========== =========== ======
</TABLE>
* Indicates non-income producing security.
See accompanying notes to financial statements.
<PAGE>
PRO FORMA COMBINED
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. AND QUALITY PROFORMA
OVERSEAS GROWTH ADJUSTMENTS PRO FORMA
ASSETS: FUND FUND (note 3) COMBINED
------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Investments at market value (cost: $9,040,632
and $2,214,390, respectively) $10,614,596 $2,324,241 $12,938,837
Cash 4,285 3,635 7,920
Receivables: 0
Investment securities sold 20,564 0 20,564
Fund shares sold 3,294 0 3,294
Dividends 8,618 1,746 10,364
Deferred organizational expenses 0 12,801 ($12,801) 0
------------ --------------- --------------- --------------
Total assets 10,651,357 2,342,423 (12,801) 12,980,979
LIABILITIES:
Payables:
Investment securities purchased 269,125 63,850 332,975
Fund shares redeemed 514,681 1,645 516,326
Organizational expenses 18,670 18,670
Accrued management and distribution fees 9,636 0 9,636
Accrued expenses 50,136 42,494 (13,136) 79,494
------------ --------------- --------------- --------------
Total liabilities 843,578 126,659 (13,136) 957,101
------------ --------------- --------------- --------------
NET ASSETS: $9,807,779 $2,215,764 $335 $12,023,878
============ =============== =============== ==============
At December 31, 1995, net assets consisted of:
Paid-in capital $8,251,242 $2,105,913 $335 $10,357,490
Accumulated net realized loss on investments (17,859) 0 (17,859)
Net unrealized appreciation on investments and 0
foreign currencies 1,574,396 109,851 1,684,247
------------ --------------- --------------- --------------
$9,807,779 $2,215,764 $335 $12,023,878
============ =============== =============== ==============
Shares outstanding (note 2) 1,173,429 177,817 1,438,473
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $8.36 $12.46 $8.36
============ =============== =============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
STATEMENT OF OPERATIONS (Unaudited) U.S. AND QUALITY PRO FORMA
FOR THE YEAR ENDED DECEMBER 31, 1995 OVERSEAS GROWTH ADJUSTMENTS PRO FORMA
FUND FUND (note 3) COMBINED
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes of $6,060 and 0, respectively) $63,812 $51,131 $114,943
Interest 3,045 16,150 19,195
------------------------------------------------
66,857 67,281 0 134,138 134,138
------------------------------------------------
EXPENSES:
Distribution 96,684 36,082 132,766
Investment management 96,092 0 32,581 128,673
Transfer agent 40,178 33,407 73,585
Professional 34,913 22,445 (22,445) 34,913
Registration 32,884 25,490 (25,490) 32,884
Custodian 31,843 11,191 (11,191) 31,843
Shareholder administration 19,919 10,524 (10,524) 19,919
Printing 13,066 8,407 (8,407) 13,066
Interest 4,645 0 4,645
Directors 2,329 2,113 (2,113) 2,329
Other 3,294 7,063 12,801 23,158
------------------------------------------------
Total expenses 375,847 156,722 (34,788) 497,781 497,781
Custodian credits (5,612) (7,813) 7,813 (5,612)
Expenses reimbursed (27,939) (21,534) 26,640 (22,833)
------------------------------------------------
Net expenses 342,296 127,375 (335) 469,336
------------------------------------------------
Net investment loss (275,439) (60,094) 335 (335,198) (335,198)
------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain from foreign currency transactions 1,302 1,302
Net realized gain from security transactions 823,207 1,054,200 1,877,407
Unrealized appreciation of investments and foreign
currencies during the period 1,481,881 (351,567) 1,130,314
------------------------------------------------
Net realized and unrealized gain on investments and
foreign currencies 2,306,390 702,633 0 3,009,023
------------------------------------------------
Net increase in net assets resulting from operations $2,030,951 $642,539 $335 $2,673,825 2,673,825
------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
BULL & BEAR U. S. AND OVERSEAS FUND
PROPOSED REORGANIZATION WITH
BULL & BEAR QUALITY GROWTH FUND
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Unaudited)
1. Basis of Combination. Subject to the approval of the Agreement and Plan of
Reorganization and Termination (the "Agreement") by the shareholders of Bull &
Bear Quality Growth Fund ("Quality Growth") and other conditions specified in
the Agreement, Bull & Bear U. S. and Overseas ("U. S. and Overseas"), a series
of shares of Bull & Bear Funds I, Inc., will acquire the assets and assume the
liabilities of Quality Growth in exchange for shares of U. S. and Overseas (the
"Reorganization"). This Reorganization of the Funds will be accounted for by the
method of accounting for tax-free reorganizations of investment companies
(sometimes referred to as the pooling without restatement method). The pro forma
combined statement of assets and liabilities reflects the financial position of
U. S. and Overseas and Quality Growth at December 31, 1995 as though the
Reorganization occurred as of that date. The statement of operations reflects
the results of operations of U. S. and Overseas and Quality Growth for the year
ended December 31, 1995. The pro forma combined amounts are based as though the
Reorganization occurred at January 1, 1995. Both the statement of assets and
liabilities and the statement of operations are presented for the information of
the reader and may not necessarily be representative of what the combined
statements would have been had the acquisition actually occurred on January 1,
1995.
The pro forma combined financial statements reflect the estimated expenses of
both Funds in carrying out their obligations under the Agreement.
2. Capital/Shares. The number of additional shares issued was calculated by
dividing the net assets of Quality Growth at December 31, 1995 by the net asset
value per share of U. S. and Overseas at December 31, 1995, of $8.36. The pro
forma combined number of shares outstanding of 1,438,473 consists of the 265,044
shares issuable to Quality Growth in the reorganization and 1,173,429 shares of
U. S. and Overseas outstanding at December 31, 1995.
3. Pro Forma Operating Expenses. Certain expenses have been adjusted in the pro
forma statement of operations to reflect the expenses of the combined entity
more closely.
Pro forma operating expenses include the actual expenses of U. S. and Overseas
and Quality Growth adjusted for the following:
a) management fees are based upon U. S. and Overseas' Investment Management
Agreement rather than the existing agreement of Quality Growth. In
addition, expenses reimbursed are based on the higher combined net assets
of the two Funds and the proforma combined expenses and therefore results
in a lower reimbursement.
<PAGE>
For its services to U. S. and Overseas, Bull & Bear Advisers, Inc.
("Advisers") receives a fee, payable monthly, based on U.S. and Overseas'
average daily net assets at the annual rate of 1.00% up to $10 million in
assets, 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. In comparison, until Quality Growth's net
assets reach $5 million, Advisers receives no investment management fee for
its services. Thereafter, Advisers receives a fee, payable monthly, based
on Quality Growth's average daily net assets at the annual rate of 1.0% up
to $10 million in assets, 7/8 of 1% over $10 million up to $30 million,
3/4% of 1% over $30 million up to $150 million, 5/8% over $150 million up
to $500 million, and 1/2% over $500 million.
Advisers has agreed in the Investment Management Agreement that it will
waive all or part of its fee or reimburse U. S. and Overseas or Bull & Bear
Funds I, Inc. (If applicable) if and to the extent that the Fund's
aggregate operating expenses exceed the most restrictive limit imposed by
any state in which shares of the Fund are qualified for sale. Currently,
the most restrictive such limit applicable to the Fund is 2.5% of the first
$30 million of the Fund's average daily net assets, 2.0% of the next $70
million of its average daily assets and 1.5% of its average daily net
assets in excess of $100 million. Certain expenses, such as brokerage
commissions, taxes, interest, Rule 12b-1 plan fees, certain expenses
attributable to investing outside the United States and extraordinary
items, are excluded from this limitation.
Both U. S. and Overseas and Quality Growth have adopted a plan of
distribution pursuant to Rule 12b-1 under the Act ("Rule 12b-1 Plan").
Under U.S. and Overseas' Rule 12b-1 Plan, the Fund pays Investor Service
Center, Inc. (The "Distributor"), as compensation for the Distributor's
distribution activities, a fee in the amount of 0.75% per annum of the
Fund's average daily net assets and, as compensation for the Distributor's
service activities, a fee in the amount of 0.25% per annum of the Fund's
average daily net assets. The fee for service activities is intended to
cover personal services provided to shareholders in the Fund and
maintenance of shareholder accounts. The fee for distribution activities is
intended to cover all other activities and expenses primarily intended to
result in the sale of the Fund's shares. During the period it is in effect,
the Plan obligates U.S. and Overseas to pay fees to the Distributor as
compensation for its service and distribution activities. Thus, even if the
Distributor's expenses exceed the fees, the Fund will not be obligated to
pay any additional amount to the Distributor and, if the Distributor's
expenses are less than such fees, it may realize a profit. No change to
U.S. and Overseas's plan, the surviving plan in the reorganization, will be
made in connection with the reorganization. No adjustments are required to
the proforma financial statements with respect to the distribution expenses
since both Rule 12b-1 Plans were the same.
b) reduction of fees to reflect the Reorganization and elimination of
certain duplicate costs.
c) the unamortized deferred organization expenses of $12,801 incurred in
connection with
<PAGE>
the start-up of the Quality Growth Fund has been written off upon the
merger.
4. Reorganization Costs. Reorganization costs associated with this
reorganization will be borne by Advisers. These costs consist of professional
fees, registration fees, printing costs, mailing and other expenses.
Additionally, Advisers will also bear some additional indirect costs of the
Reorganization by providing employee time and effort in the planning,
preparation, and consummation of the Reorganization.
<PAGE>
BULL & BEAR FUNDS I, INC.
PART C
OTHER INFORMATION
Item 15. Indemnification
Bull & Bear Funds I, Inc. (the "Corporation") is incorporated under
Maryland law. Section 2-418 of the Maryland General Corporation Law requires the
Corporation to indemnify its directors, officers and employees against expenses,
including legal fees, in a successful defense of a civil or criminal proceeding.
The law also permits indemnification of directors, officers, employees and
agents unless it is proved that (a) the act or omission of the person was
material and was committed in bad faith or was the result of active or
deliberate dishonesty, (b) the person received an improper personal benefit in
money, property or services or (c) in the case of a criminal action, the person
had reasonable cause to believe that the act or omission was unlawful.
The Corporation's amended and restated Articles of Incorporation (1)
provide that, to the maximum extent permitted by applicable law, a director or
officer will not be liable to the Corporation or its stockholders for monetary
damages; (2) require the Corporation to indemnify and advance expense as
provided in the By-laws to its present and past directors, officers, employees
and agents, and persons who are serving or have served at the request of the
Corporation in similar capacities for other entities in advance of final
disposition of any action against that person to the extent permitted by
Maryland law and the 1940 Act; (3) allow the Corporation to purchase insurance
for any present or past director, officer, employee, or agent; and (4) require
that any repeal or modification of the amended and restated Articles of
Incorporation by the shareholders, or adoption or modification of any provision
of the Articles of Incorporation inconsistent with the indemnification
provisions, be prospective only to the extent such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
or indemnification available to any person covered by the indemnification
provisions of the amended and restated Articles of Incorporation.
Section 11.01 of Article XI of the By-Laws sets forth the procedures by
which the Corporation will indemnify its directors, officers, employees and
agents. Section 11.02 of Article XI of the By-Laws further provides that the
Corporation may purchase and maintain insurance or other sources of
reimbursement to the extent permitted by law on behalf of any person who is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in or arising out of his
or her position.
Paragraph 12 of the Investment Management Agreement between the
Corporation and Bull & Bear Advisers, Inc. (the "Investment Manager") with
respect to Acquiring Fund ("Overseas Investment Management Agreement") provides
that the Investment Manager shall not be liable to the Corporation or Acquiring
Fund or any shareholder of the Corporation for any error of judgment or mistake
of law or for any loss suffered by the Corporation in connection with the
matters to which the Overseas Investment Management Agreement relates, but
nothing herein contained shall be construed to protect the Investment Manager
against any liability to the Corporation or Acquiring Fund or the Corporation's
shareholders by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties or by reasons of its reckless disregard of
obligations and duties under the Overseas Investment Management Agreement.
Paragraph 12 of the Investment Management Agreement between the
Corporation and the Investment Manager with respect to Growth Fund ("Quality
Growth Investment Management Agreement") provides that the Investment Manager
shall not be liable to the Corporation or Growth Fund or any shareholder of the
Corporation for any error of judgment or mistake of law or for any loss suffered
by the Corporation or Growth Fund or the Corporation's shareholders in
connection with the matters to which the Quality Growth Investment Management
Agreement relates, but nothing herein contained shall be construed to protect
the Investment Manager against any liability to the Corporation or Growth 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 Quality Growth Investment
Management Agreement.
Section 9 of the Distribution Agreement between the Corporation and
Investor Service Center, Inc. ("Service Center") provides that the Corporation
will indemnify Service Center and its officers, directors and controlling
persons against all liabilities arising from any alleged untrue statement of
material fact in the Corporation's Registration Statement or from any alleged
omission to state in the Registration Statement a material fact required to be
stated in it or necessary to make the statements in it, in light of the
circumstances under which they were made, not misleading, except insofar as
liability arises from untrue statements or omissions made in reliance upon and
in conformity with information furnished by Service Center to the Corporation
for use in the Registration Statement; and provided that this indemnity
agreement shall not protect any such persons against liabilities arising by
reason of their bad faith, gross negligence or willful misfeasance; and shall
not inure to the benefit of any such persons unless a court of competent
jurisdiction or controlling precedent determines that such result is not against
public policy as expressed in the Securities Act of 1933. Section 9 of the
Distribution Agreement also provides that Service Center agrees to indemnify,
defend and hold the Corporation, its officers and Directors free and harmless of
any claims arising out of any alleged untrue statement or any alleged omission
of material fact contained in information furnished by Service Center for use in
the Registration Statement or arising out of any agreement between Service
Center and any retail dealer, or arising out of supplementary literature or
advertising used by Service Center in connection with the Distribution
Agreement.
<PAGE>
The Corporation undertakes to carry out all indemnification provisions of
its Articles of Incorporation and By-Laws and the above-described contract in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to directors, officers and controlling
persons of the Corporation, pursuant to the foregoing provisions or otherwise,
the Corporation has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Corporation of expenses incurred or paid by a director, officer or controlling
person of the Corporation with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Corporation by such director, officer or controlling person in connection with
the securities being registered, the Corporation will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Articles of Incorporation1/
(2) Amended By-Laws1/
(3) Voting trust agreement -- none
(4) Agreement and Plan of Reorganization and Termination
(filed herewith)
(5) Specimen security2/
(6) Investment Advisory Contract1/
(7) Distribution Agreement1/
(8) Bonus, profit sharing or pension plans - none
(9) (a) Custodian Agreement3/
(b) Amendment to Custodian Agreement4/
(c) Amendment dated September 28, 1993 to Custodian Agreement1/
(d) Depository agreements4/
(e) Service and Agency Agreement2/
(f) Custodial Agreement and IRA Disclosure Statement2/
(g) IRA Agreement2/
(10)(a) Plan pursuant to Rule 12b-11/
(b) Related Agreement to Plans of Distribution pursuant to Rule
12b-1 between Investor Service Center, Inc. and
Hanover Direct Advertising Company, Inc.1/
(c) Broker services agreements4/
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the
legality of securities being registered (filed herewith)
(12) Opinion and Consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters (filed herewith)
(13)(a) Transfer Agency Agreement2/
(b) Assignment Agreement2/
(c) Shareholder Services Agreement1/
(d) Agency Agreement2/
(14) Consent of Tait, Weller & Baker (filed herewith)
(15) Financial statements omitted from Part B - none
(16) Copies of manually signed Powers of Attorney - none
(17) Additional Exhibits
(a) Declaration pursuant to Rule 24f-2 (filed herewith)
(b) Proxy Card (filed herewith)
(27) Financial Data Schedules (filed herewith)
- ---------------
1/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 15 to the Registration Statement, SEC File No. 33-6898, filed
March 2, 1994.
2/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 17 to the Registration Statement, SEC File No. 33-6898, filed
April 28, 1995.
3/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 5 to the Registration Statement, SEC File No. 33-6898, filed May
1, 1990.
4/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 13 to the Registration Statement, SEC File No. 33-6898, filed
April 30, 1993.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public re-offering
of the securities registered through the use of the prospectus which is
a part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the re-offering prospectus will contain the
information called for by the applicable registration form for
re-offering by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
Registration Statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York
and the State of New York, on this 22nd day of February, 1996.
BULL & BEAR FUNDS I, INC.
By: /s/ Thomas B. Winmill
---------------------
Thomas B. Winmill
Co-President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Mark C. Winmill Co-President and Co-Chief February 22, 1996
- ---------------------------- Executive Officer
Mark C. Winmill
/s/ Thomas B. Winmill Co-President and Co-Chief February 22, 1996
- ---------------------------- Executive Officer
Thomas B. Winmill
/s/ Bassett S. Winmill Director, Chairman of the February 22, 1996
- ---------------------------- Board of Directors
Bassett S. Winmill
/s/ Robert D. Anderson Director February 22, 1996
- ----------------------------
Robert D. Anderson
/s/ Bruce B. Huber Director February 22, 1996
- ----------------------------
Bruce B. Huber
/s/ James E. Hunt Director February 22, 1996
- ----------------------------
James E. Hunt
/s/ Frederick A. Parker, Jr. Director February 22, 1996
- ----------------------------
Frederick A. Parker, Jr.
/s/ John B. Russell Director February 22, 1996
- ----------------------------
John B. Russell
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO.
Bull & Bear Funds I, Inc.
File No. 33-6898
<PAGE>
BULL & BEAR FUNDS I, INC.
EXHIBIT INDEX
Exhibit
Number
------
(1) Amended and Restated Articles of Incorporation1/
(2) Amended By-Laws1/
(3) Voting trust agreement -- none
(4) Agreement and Plan of Reorganization and Termination
(filed herewith)
(5) Specimen security2/
(6) Investment Advisory Contract1/
(7) Distribution Agreement1/
(8) Bonus, profit sharing or pension plans - none
(9) (a) Custodian Agreement3/
(b) Amendment to Custodian Agreement4/
(c) Amendment dated September 28, 1993 to Custodian Agreement1/
(d) Depository agreements4/
(e) Service and Agency Agreement2/
(f) Custodial Agreement and IRA Disclosure Statement2/
(g) IRA Agreement2/
(10)(a) Plan pursuant to Rule 12b-11/
(b) Related Agreement to Plans of Distribution pursuant to Rule
12b-1 between Investor Service Center, Inc. and
Hanover Direct Advertising Company, Inc.1/
(c) Broker services agreements4/
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the
legality of securities being registered (filed
herewith)
(12) Opinion and Consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters (filed herewith)
(13)(a) Transfer Agency Agreement2/
(b) Assignment Agreement2/
(c) Shareholder Services Agreement1/
(d) Agency Agreement2/
(14) Consent of Tait, Weller & Baker (filed herewith)
(15) Financial statements omitted from Part B - none
(16) Copies of manually signed Powers of Attorney - none
(17) Additional Exhibits
(a) Declaration pursuant to Rule 24f-2 (filed herewith)
(b) Proxy Card (filed herewith)
(27) Financial Data Schedules (filed herewith)
- --------------
1/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 15 to the Registration Statement, SEC File No. 33-6898, filed
March 2, 1994.
2/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 17 to the Registration Statement, SEC File No. 33-6898, filed
April 28, 1995.
3/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 5 to the Registration Statement, SEC File No. 33-6898, filed May
1, 1990.
4/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 13 to the Registration Statement, SEC File No. 33-6898, filed
April 30, 1993.
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of February 20, 1996, between Bull & Bear Funds I, Inc. ("Corporation"),
on behalf of Bull & Bear U.S. and Overseas Fund, a segregated portfolio of
assets ("series") thereof ("Acquiring Fund"), and the Corporation, on behalf of
Bull & Bear Quality Growth Fund, another series thereof ("Target"). (Acquiring
Fund and Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund ("Acquiring Fund Shares") and the assumption by
Acquiring Fund of Target's liabilities, followed by the constructive
distribution of the Acquiring Fund Shares to the holders of shares of common
stock in Target ("Target Shares") in exchange therefor, all upon the terms and
conditions set forth herein. The foregoing transactions are referred to herein
as the "Reorganization." All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by the Corporation on its behalf.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) by the net asset value (computed
as set forth in paragraph 2.2) ("NAV") of an Acquiring Fund Share; and
<PAGE>
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. Before the Effective Time, Target shall declare and pay to its
shareholders a dividend and/or other distribution in an amount large enough so
that it will have distributed substantially all (and in any event not less than
90%) of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
- 2 -
<PAGE>
Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder. All outstanding Target Shares, including any represented
by certificates, shall simultaneously be canceled on Target's share transfer
records. Acquiring Fund will issue certificates representing the Acquiring Fund
Shares issued in connection with the Reorganization only for full Acquiring Fund
Shares when requested in writing.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
the Corporation and any further actions shall be taken in connection therewith
as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of 4:00 p.m. on the date of the Closing
("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus and statement of additional
information.
- 3 -
<PAGE>
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of the Corporation's Board of Directors.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on April 26,
1996, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of 4:00 p.m. on the date thereof or at such other time as the
parties may agree ("Effective Time"). If, immediately before the Valuation Time,
(a) the New York Stock Exchange, Inc. ("NYSE") is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall
be postponed until the first business day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
3.2. The Corporation shall deliver at the Closing a schedule of the Assets
as of the Effective Time, which shall set forth for all portfolio securities
included therein their adjusted tax basis and holding period by lot. Target's
custodian shall deliver at the Closing a certificate of an authorized officer
stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. The Corporation shall deliver at the Closing a list of the names and
addresses of the Shareholders and the number of outstanding Target Shares owned
by each Shareholder, all as of the Effective Time, certified by the
Corporation's Secretary or Assistant Secretary. The Transfer Agent shall deliver
at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. The Corporation shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited to Target at the Effective Time or provide evidence that such Acquiring
- 4 -
<PAGE>
Fund Shares have been credited to Target's account on Acquiring Fund's books.
The Corporation shall deliver at the Closing such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as may reasonably
be required.
3.4. The Corporation shall deliver at the Closing a certificate executed in
its name by a Co-President or a Vice President dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland, and
a copy of its Articles of Incorporation is on file with the Department of
Assessments and Taxation of Maryland ("Department");
4.1.2. The Corporation is duly registered as an open-end management
investment company under the Investment Company Act of 1940 ("1940 Act"),
and such registration will be in full force and effect at the Effective
Time;
4.1.3. Target is a duly established and designated series of the
Corporation;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
- 5 -
<PAGE>
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
by Target will not conflict with or violate, Maryland law or any provision
of the Corporation's Articles of Incorporation or By-Laws or of any
agreement, instrument, lease, or other undertaking to which Target is a
party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Target is a party or by which it is bound,
except as previously disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund;
4.1.7. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, all material contracts and other
commitments of or applicable to Target (other than this Agreement and
investment contracts, including options, futures and forward contracts)
will be terminated, or provision for discharge of any liabilities of Target
thereunder will be made, at or prior to the Effective Time, without either
Fund's incurring any liability or penalty with respect thereto and without
diminishing or releasing any rights Target may have had with respect to
actions taken or omitted to be taken by any other party thereto prior to
the Closing;
4.1.8. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental body is
presently pending or (to Target's knowledge) threatened against the
Corporation with respect to Target or any of its properties or assets that,
if adversely determined, would materially and adversely affect Target's
financial condition or the conduct of its business; Target knows of no
facts that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
- 6 -
<PAGE>
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement by
Target have been duly authorized as of the date hereof by all necessary
action on the part of the Corporation's board of directors, which has made
the determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to approval by Target's shareholders and receipt of any necessary
exemptive relief or no-action assurances requested from the Securities and
Exchange Commission ("SEC") or its staff with respect to sections 17(a) and
17(d) of the 1940 Act, this Agreement will constitute a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ("1934 Act"), or the 1940 Act for the execution or performance of this
Agreement by Target, except for (a) the filing with the SEC of a
registration statement by the Corporation on Form N-14 relating to the
Acquiring Fund Shares issuable hereunder, and any supplement or amendment
thereto ("Registration Statement"), including therein a prospectus/proxy
statement ("Proxy Statement"), (b) receipt of any necessary exemptive
relief referenced in subparagraph 4.1.9, and (c) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
- 7 -
<PAGE>
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by the Corporation with respect to Acquiring Fund for
use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
- 8 -
<PAGE>
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland, and
a copy of its Articles of Incorporation is on file with the Department;
4.2.2. The Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
the Corporation;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable.
Except as contemplated by this Agreement, Acquiring Fund does not have
outstanding any options, warrants, or other rights to subscribe for or
purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby by Acquiring Fund will not conflict with or violate,
Maryland law or any provision of the Corporation's Articles of
Incorporation or By-Laws or of any provision of any agreement, instrument,
- 9 -
<PAGE>
lease, or other undertaking to which Acquiring Fund is a party or by which
it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Acquiring Fund is a party or by which it is bound, except as
previously disclosed in writing to and accepted by the Corporation on
behalf of Target;
4.2.8. Except as otherwise disclosed in writing to and accepted by the
Corporation on behalf of Target, no litigation, administrative proceeding,
or investigation of or before any court or governmental body is presently
pending or (to Acquiring Fund's knowledge) threatened against the
Corporation with respect to Acquiring Fund or any of its properties or
assets that, if adversely determined, would materially and adversely affect
Acquiring Fund's financial condition or the conduct of its business;
Acquiring Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment
of any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement by
Acquiring Fund have been duly authorized as of the date hereof by all
necessary action on the part of the Corporation's board of directors, which
has made the determinations required by Rule 17a-8(a) under the 1940 Act;
and, subject to receipt of any necessary exemptive relief or no-action
assurances requested from the SEC or its staff with respect to sections
17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and
legally binding obligation of Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Target, except for (a)
the filing with the SEC of the Registration Statement, (b) receipt of any
- 10 -
<PAGE>
necessary exemptive relief referenced in subparagraph 4.2.9, and (c) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by the Corporation with respect to Target for use
therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
- 11 -
<PAGE>
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC, and (c) expects to retain substantially all the Assets
in the same form as it receives them in the Reorganization, unless and
until subsequent investment circumstances suggest the desirability of
change or it becomes necessary to make dispositions thereof to maintain
such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at
the Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis. Nor does its
- 12 -
<PAGE>
management anticipate that there will be extraordinary redemptions of
Acquiring Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax and/or
the excise tax under section 4982 of the Code and (b) redemptions not made
as part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
- 13 -
<PAGE>
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. The Corporation covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
- 14 -
<PAGE>
5.5. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Corporation's board of directors and shall
have been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
- 15 -
<PAGE>
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. The Corporation (on behalf of Target) shall have received an opinion
of Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of the Corporation,
a corporation duly organized and validly existing under the laws of the
State of Maryland with power under its Articles of Incorporation to own all
of its properties and assets and, to the knowledge of such counsel, to
carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by the Corporation on behalf of Acquiring Fund and (b) assuming
due authorization, execution, and delivery of this Agreement by the
Corporation on behalf of Target, is a valid and legally binding obligation
of the Corporation with respect to Acquiring Fund, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, and no shareholder of
Acquiring Fund has any preemptive right to subscribe for or purchase such
shares;
6.4.4. Acquiring Fund's execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will not,
materially violate the Corporation's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which the Corporation (with
respect to Acquiring Fund) is a party or by which it is bound or (to the
- 16 -
<PAGE>
knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which the Corporation (with respect to Acquiring Fund) is a party or by
which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by the Corporation on behalf of
Target;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by the
Corporation on behalf of Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act,
and the 1940 Act and such as may be required under state securities laws;
6.4.6. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to the Corporation (with respect to Acquiring Fund) or any of
its properties or assets attributable or allocable to Acquiring Fund and
(b) the Corporation (with respect to Acquiring Fund) is not a party to or
subject to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by the Corporation on behalf of Target.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
- 17 -
<PAGE>
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.5. The Corporation (on behalf of Acquiring Fund) shall have received an
opinion of Kirkpatrick & Lockhart LLP, its counsel, substantially to the effect
that:
6.5.1. Target is a duly established series of the Corporation, a
corporation duly organized and validly existing under the laws of the State
of Maryland with power under its Articles of Incorporation to own all of
its properties and assets and, to the knowledge of such counsel, to carry
on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by the Corporation on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by the Corporation
on behalf of Acquiring Fund, is a valid and legally binding obligation of
the Corporation with respect to Target, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. Target's execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not,
materially violate the Corporation's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which the Corporation (with
respect to Target) is a party or by which it is bound or (to the knowledge
of such counsel, without any independent inquiry or investigation) result
in the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which the Corporation (with
respect to Target) is a party or by which it is bound, except as set forth
in such opinion or as previously disclosed in writing to and accepted by
the Corporation on behalf of Acquiring Fund;
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
- 18 -
<PAGE>
any court or governmental authority is required for the consummation by the
Corporation on behalf of Target of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act, and the
1940 Act and such as may be required under state securities laws;
6.5.5. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to the Corporation (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) the
Corporation (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by the Corporation on behalf of Acquiring Fund.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. The Corporation shall have received an opinion of Kirkpatrick &
Lockhart LLP, its counsel, as to the federal income tax consequences mentioned
below ("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as to
factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in a separate letter or certificate
addressed to such counsel) and the certificates delivered pursuant to paragraph
- 19 -
<PAGE>
3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
- 20 -
<PAGE>
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset (including certain options, futures, and
forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the foregoing
conditions if, in the judgment of the Corporation's board of directors, such
waiver will not have a material adverse effect on its shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by Bull & Bear Advisers, Inc. Such expenses
include: (a) expenses incurred in connection with entering into and carrying out
the provisions of this Agreement; (b) expenses associated with the preparation
and filing of the Registration Statement; (c) registration or qualification fees
and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which Target's shareholders are
resident as of the date of the mailing of the Proxy Statement to such
shareholders; (d) printing and postage expenses; (e) legal and accounting fees;
and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
- 21 -
<PAGE>
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before August 20, 1996; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of the Corporation, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
- 22 -
<PAGE>
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR U.S. AND OVERSEAS
FUND
By: /s/ William J. Maynard /s/ Thomas B. Winmill
---------------------- ---------------------
Secretary Co-President
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR QUALITY GROWTH FUND
By: /s/ William J. Maynard /s/ Thomas B. Winmill
---------------------- ---------------------
Secretary Co-President
- 23 -
ARTHUR J. BROWN
(202) 778-9046
[email protected]
February 20, 1996
Bull & Bear Funds I, Inc.
11 Hanover Square
New York, New York 10005
Ladies and Gentlemen:
You have requested our opinion as to certain matters regarding the issuance
by Bull & Bear Funds I, Inc. (the "Corporation"), a corporation organized under
the laws of the State of Maryland, of shares of common stock (the "Shares") of
Bull & Bear U.S. and Overseas Fund (the "Acquiring Fund"), a series of the
Corporation, pursuant to an Agreement and Plan of Reorganization and Termination
("Plan") between the Corporation, on behalf of Acquiring Fund, and the
Corporation, on behalf of Bull & Bear Quality Growth Fund (the "Target") . Under
the Plan, Acquiring Fund would acquire the assets of Target in exchange for the
Shares and the assumption by Acquiring Fund of Target's liabilities. In
connection with the Plan, the Corporation is about to file a Registration
Statement on Form N-14 (the "N-14") for the purpose of registering the Shares
under the Securities Act of 1933, as amended ("1933 Act"), to be issued pursuant
to the Plan.
We have examined originals or copies believed by us to be genuine of the
Corporation's Articles of Incorporation and By-Laws, as amended and restated,
minutes of meetings of its board of directors, the form of Plan, and such other
documents relating to the authorization and issuance of the Shares as we have
deemed relevant. Based upon that examination, we are of the opinion that the
Shares being registered by the N-14 when issued in accordance with the Plan and
the Corporation's Articles of Incorporation and By-Laws, as amended and
<PAGE>
restated, will be legally issued, fully paid and non-assessable, subject to
compliance with the 1933 Act, the Investment Company Act of 1940, as amended,
and applicable state laws regulating the offer and sale of securities.
We hereby consent to this opinion accompanying the N-14 which the
Corporation is about to file with the Securities and Exchange Commission and to
the reference to our firm under the caption "Miscellaneous - Legal Matters" in
the Prospectus/Proxy Statement filed as part of the N-14.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur J. Brown
-------------------
Arthur J. Brown
THEODORE L. PRESS
(202) 778-9025
[email protected]
February 20, 1996
Bull & Bear Funds I, Inc.
11 Hanover Square
New York, NY 10005
Ladies and Gentlemen:
Bull & Bear Funds I, Inc. ("B&B Corporation"), on behalf of Bull & Bear
U.S. and Over seas Fund, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), and Bull & Bear Quality Growth Fund, another series thereof
("Target"), has requested our opinion as to certain federal income tax
consequences of the proposed acquisition by Acquiring Fund of Target,1/ pursuant
to an Agreement and Plan of Reorganization and Termination between them dated as
of February 20, 1996 ("Plan"), attached as an exhibit to the prospectus/proxy
statement to be furnished in connection with the solicitation of proxies by B&B
Corporation's board of directors for use at a special meeting of Target
shareholders ("Special Meeting") to be held on April 25, 1996 ("Proxy"),
included in the registration statement on Form N-14 to be filed with the Secu
rities and Exchange Commission ("SEC") on or about the date hereof
("Registration Statement"). Specifically, B&B Corporation has requested our
opinion:
(1) that the acquisition by Acquiring Fund of Target's assets in
exchange solely for voting shares of common stock in Acquiring Fund and the
assumption by Acquiring Fund of Target's liabilities, followed by the
distribution of those shares by Target pro rata to its shareholders of
record as of the Effective Time (as hereinafter defined) ("Shareholders")
constructively in exchange for their shares of common stock in Target
("Target Shares") (such transaction sometimes being referred to herein as
the "Reorganization"), will constitute a "reorganization" within the
- --------
1/ Acquiring Fund and Target are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds."
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 2
meaning of section 368(a)(1)(C)2/ and that each Fund will be a "party to a
reorganization" within the meaning of section 368(b),
(2) that Target, the Shareholders, and Acquiring Fund will recognize
no gain or loss upon the Reorganization, and
(3) regarding the basis and holding period after the Reorganization of
the transferred assets and the shares of Acquiring Fund issued pursuant
thereto.
In rendering this opinion, we have examined (1) Acquiring Fund's and
Target's currently effective prospectuses and statements of additional
information, all dated May 1, 1995 ("Prospectuses" and "SAIs," respectively),
(2) the Proxy, (3) the Plan, and (4) such other docu ments as we have deemed
necessary or appropriate for the purposes hereof. As to various matters of fact
material to this opinion, we have relied, exclusively and without independent
verification, on statements of responsible officers of B&B Corporation and the
representations described below and made in the Plan (as contemplated in
paragraph 6.6 thereof) (collectively "Representations").
FACTS
B&B Corporation is a corporation organized under the laws of the State of
Maryland pur suant to Articles of Incorporation, as amended and restated
September 23, 1993; Acquiring Fund and Target commenced operations as series
thereof on October 29, 1987, and October 1, 1993, respectively. B&B Corporation
is registered with the SEC as an open-end management investment company under
the Investment Company Act of 1940 ("1940 Act"). Bull & Bear Advisers, Inc.
("Investment Manager") serves as each Fund's investment adviser and
administrator.
The Reorganization, together with all related acts necessary to consummate
the same ("Closing"), shall occur as of 4:00 p.m., Eastern time, on April 26,
1996 (or on such other date or at such other time as the parties may agree)
("Effective Time"). Before the Effective Time, Target shall declare and pay to
its shareholders a dividend and/or other distribution in an amount large enough
so that it will have distributed substantially all (and in any event not less
than 90%) of its investment company taxable income (computed without regard to
any deduction for divi dends paid) and realized net capital gain, if any, for
the current taxable year through the Effective Time.
- --------
2/ All section references are to the Internal Revenue Code of 1986, as amended
("Code"), and all "Treas. Reg. ss." references are to the regulations under the
Code ("Regulations").
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 3
The Funds' investment objectives, which are very similar, and investment
policies, which are generally alike, are described in the Proxy and their
respective Prospectuses and SAIs. Although there are differences in the Funds'
investment policies, it is not expected that Acquiring Fund will revise its
investment policies following the Reorganization to reflect Target's. Because
Target is permitted to invest in securities having characteristics different
from those permitted for Acquiring Fund, certain of the securities currently
held by Target may need to be sold rather than transferred to Acquiring Fund. If
the Reorganization is approved, Target may sell prior to the Effective Time any
assets if necessary that are inconsistent with Acquiring Fund's investment
policies, and the proceeds thereof will be held in temporary investments or
reinvested in assets that qualify to be held by Acquiring Fund.
The Reorganization was recommended by the Investment Manager to B&B
Corporation's board of directors ("board") at a meeting thereof held on February
15, 1996. In considering the Reorganization, the board made an extensive inquiry
into a number of factors (which are described in the Proxy, together with the
Investment Manager's advice and recommendations to the board and the purposes of
the Reorganization). Pursuant thereto, the board approved the Plan, subject to
approval of Target's shareholders. In doing so, the board, including a majority
of its members who are not "interested persons" (as that term is defined in the
1940 Act) of B&B Corporation, determined that the Reorganization is in each
Fund's best interests, that the terms of the Reorganization are fair and
reasonable, and that each Fund's shareholders' interests will not be diluted as
a result of the Reorganization.
The Plan, which specifies that it is intended to be, and is adopted as, a
plan of a reorganization described in section 368(a)(1)(C), provides in relevant
part for the following:
(1) The acquisition by Acquiring Fund of all cash, cash equivalents,
securities, receivables (including interest and dividends receivable),
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown as
assets on Target's books, and other property owned by Target at the
Effective Time (collectively "Assets") in exchange solely for
(a) the number of full and fractional shares of common stock in
Acquiring Fund ("Acquiring Fund Shares") determined by dividing the
net value of Target by the net asset value ("NAV") of an Acquiring
Fund Share, and
(b) Acquiring Fund's assumption of all of Target's liabilities,
debts, obligations, and duties of whatever kind or nature, whether
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 4
absolute, accrued, contingent, or otherwise, whether or not arising in
the ordinary course of business, whether or not determin able at the
Effective Time, and whether or not specifically referred to in the
Plan, including without limitation Target's share of the ex penses
incurred in connection with the Reorganization (collectively
"Liabilities") (Target having agreed in the Plan to use its best
efforts to discharge all of its known liabilities and obligations
prior to the Effective Time),
(2) The constructive distribution of such Acquiring Fund Shares to the
Shareholders, and
(3) The subsequent termination of Target.
The distribution described in (2) will be accomplished by transferring the
Acquiring Fund Shares then credited to Target's account on Acquiring Fund's
share transfer records to open accounts on those records established in the
Shareholders' names, with each Shareholder's account being credited with the
respective pro rata number of full and fractional (rounded to three decimal
places) Acquiring Fund Shares due such Shareholder. All outstanding Target
Shares, including any represented by certificates, simultaneously will be
canceled on Target's share transfer records.
REPRESENTATIONS
The representations enumerated below have been made to us by appropriate
officers of B&B Corporation.
B&B Corporation, on behalf of each Fund, has represented and warranted to
us as follows:
1. The fair market value of the Acquiring Fund Shares, when received
by the Shareholders, will be approximately equal to the fair market value
of their Target Shares constructively surrendered in exchange therefor;
2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 5
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis. Nor does its
management anticipate that there will be extraordinary redemp tions of
Acquiring Fund Shares immediately following the Reorganization;
3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4. Immediately following consummation of the Reorganization, Acquiring
Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
5. The fair market value on a going concern basis of the Assets will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those
to which the Assets are subject;
6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the
gross assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax and/or
the excise tax under section 4982 and (b) redemptions not made as part of
the Reorganization) will be included as assets thereof held immediately
before the Reorganization;
8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 6
9. Immediately after the Reorganization, the Shareholders will not own
shares constituting "control" of Acquiring Fund within the meaning of
section 304(c).
B&B Corporation also has represented and warranted to us on behalf of
Target as follows:
1. The Liabilities were incurred by Target in the ordinary course of
its business;
2. Target is a "fund" as defined in section 851(h)(2); it qualified
for treatment as a regulated investment company ("RIC") under Subchapter M
of the Code ("Subchapter M") for each past taxable year since it commenced
operations and will continue to meet all the requirements for such
qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it;
3. Target is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning
of section 368(a)(3)(A);
4. Not more than 25% of the value of Target's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the stock
and securities of any one issuer, and not more than 50% of the value of
such assets is invested in the stock and securities of five or fewer
issuers; and
5. Target will be terminated as soon as reasonably practicable after
the Reorgani zation, but in all events within six months after the
Effective Time.
B&B Corporation also has represented and warranted to us on behalf of
Acquiring Fund as follows:
1. Acquiring Fund is a "fund" as defined in section 851(h)(2); it
qualified for treatment as a RIC under Subchapter M for each past taxable
year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it;
2. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 7
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
3. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC under Subchapter M, and (c) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4. There is no plan or intention for Acquiring Fund to be dissolved or
merged into another corporation or business trust or any "fund" thereof
(within the meaning of section 851(h)(2)) following the Reorganization;
5. Immediately after the Reorganization, (a) not more than 25% of the
value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers; and
6. Acquiring Fund does not own, directly or indirectly, nor at the
Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
OPINION
Based solely on the facts set forth above, and conditioned on (1) the
Representations being true at the time of Closing and (2) the Reorganization
being consummated in accordance with the Plan, our opinion (as explained more
fully in the next section of this letter) is as follows:
1. Acquiring Fund's acquisition of the Assets in exchange solely for
the Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata to
the Shareholders constructively in exchange for their Target Shares, will
constitute a reorganization within the meaning of section 368(a)(1)(C), and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b);
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 8
2. No gain or loss will be recognized to Target on the transfer of the
Assets to Acquiring Fund in exchange solely for the Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or upon the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares (section 361);
3. No gain or loss will be recognized to Acquiring Fund on its receipt
of the Assets in exchange solely for the Acquiring Fund Shares and its
assumption of the Liabil ities (section 1032(a));
4. Acquiring Fund's basis for the Assets will be the same as the basis
thereof in Target's hands immediately before the Reorganization (section
362(b)), and Acquiring Fund's holding period for the Assets will include
Target's holding period therefor (section 1223(2));
5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization (sec tion 354(a)); and
6. A Shareholder's basis for the Acquiring Fund Shares to be received
by it in the Reorganization will be the same as the basis for its Target
Shares to be constructively surrendered in exchange for those Acquiring
Fund Shares (section 358(a)), and its holding period for those Acquiring
Fund Shares will include its holding period for those Target Shares,
provided they are held as capital assets by the Shareholder on the Closing
Date (section 1223(1)).
The foregoing opinion (1) is based on, and is conditioned on the continued
applicability of, the provisions of the Code and the Regulations, judicial
decisions, and rulings and other pronouncements of the Internal Revenue Service
("Service") in existence on the date hereof and (2) is applicable only to the
extent each Fund is solvent. We express no opinion about the tax treatment of
the transactions described herein if either Fund is insolvent.
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 9
ANALYSIS
I. The Reorganization Will Be a Reorganization under Section 368(a)(1)(C), and
Each Fund Will Be a Party to a Reorganization.
A. Each Fund Is a Separate Corporation.
A reorganization under section 368(a)(1)(C) (a "C reorganization") involves
the acquisition by one corporation, in exchange solely for all or a part of its
voting stock, of substantially all of the properties of another corporation. For
the transaction to qualify under that section, therefore, both entities involved
therein must be corporations (or associations taxable as corporations). Although
B&B Corporation is a corporation, it is not participating as a party to the
Reorganization, but rather two series thereof (the Funds) are the participants.
Ordinarily, a transaction involving two segregated pools of assets (such as the
Funds) held by the same corporation could not qualify as a reorganization,
because each pool would not be a corporation. Under section 851(h), however,
each Fund is treated as a separate corporation for all purposes of the Code save
the definitional requirement of section 851(a) (which is satisfied by B&B
Corporation). Thus, we believe that each Fund will be a separate corporation,
and each Fund's shares will be treated as shares of corporate stock, for
purposes of section 368(a)(1)(C).
B. Satisfaction of Section 368(a)(2)(F).
Under section 368(a)(2)(F), if two or more parties to a transaction
described in section 368(a)(1) (other than subparagraph (E) thereof) are
"investment companies," the transaction will not be considered a reorganization
with respect to any such investment company or its shareholders unless, among
other things, the investment company is a RIC or --
(1) not more than 25% of the value of its total assets is invested in the
stock and securities of any one issuer and
(2) not more than 50% of the value of its total assets is invested in the
stock and securities of five or fewer issuers.
Each Fund will meet the requirements for qualification and treatment as a RIC
for its respective current taxable year, and the foregoing percentage tests will
be satisfied by each Fund. Accordingly, we believe that section 368(a)(2)(F)
will not cause the Reorganization to fail to qualify as a C reorganization with
respect to either Fund.
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 10
C. Transfer of "Substantially All" of the Properties.
For an acquisition to qualify as a C reorganization, the acquiring
corporation must acquire "substantially all of the properties" of the transferor
corporation solely in exchange for all or part of the acquiring corporation's
stock. For purposes of issuing private letter rulings, the Service considers the
transfer of at least 70% of the transferor's gross assets, and at least 90% of
its net assets, held immediately before the reorganization to satisfy the
"substantially all" requirement. Rev. Proc. 77-37, 1977-2 C.B. 568. The
Reorganization will involve such a transfer. Accordingly, we believe that the
Reorganization will involve the transfer to Acquiring Fund of substantially all
of Target's properties.
D. Qualifying Consideration.
For an acquisition to qualify as a C reorganization, the acquiring
corporation must acquire at least 80% (by fair market value) of the transferor's
property solely in exchange for voting stock. Section 368(a)(2)(B)(iii). The
assumption of liabilities by the acquiring corporation or its acquisition of
property subject to liabilities normally are disregarded (section 368(a)(1)(C)),
but the amount of any such liabilities will be treated as money paid for the
transferor's property if the acquiring corporation exchanges any money or
property (other than its voting stock) therefor. Section 368(a)(2)(B). Because
Acquiring Fund will exchange only the Acquiring Fund Shares, and no money or
other property, for the Assets, we believe that the Reorganization will satisfy
the solely-for-voting-stock requirement to qualify as a C reorganization.
E. Requirements of Continuity.
Treasury Regulation section 1.368-1(b) sets forth two prerequisites to a
valid reorganization: (1) a continuity of the business enterprise under the
modified corporate form ("continuity of business") and (2) a continuity of
interest therein on the part of those persons who, directly or indirectly, were
the owners of the enterprise prior to the reorganization ("continuity of
interest").
1. Continuity of Business.
The continuity of business enterprise test as set forth in Treas. Reg. ss.
1.368-1(d)(2) requires that the acquiring corporation must either (i) continue
the acquired corporation's historic business ("business continuity") or (ii) use
a significant portion of the acquired corporation's historic business assets in
a business ("asset continuity").
While there is no authority that deals directly with the requirement of
continuity of business in the context of a transaction such as the
Reorganization, Rev. Rul. 87-76, 1987-2 C.B. 84, deals with a somewhat similar
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 11
situation. In that ruling, P was a RIC that invested exclusively in municipal
securities. P acquired the assets of T in exchange for P common stock in a
transaction that was intended to qualify as a C reorganization. Prior to the
exchange, T sold its entire portfolio of corporate securities and purchased a
portfolio of municipal bonds. The Service held that this transaction did not
qualify as a reorganization for the following reasons: (1) because T had sold
its historic assets prior to the exchange, there was no asset continuity; and
(2) the failure of P to engage in the business of investing in corporate
securities after the exchange caused the transaction to lack business continuity
as well.
The Funds' investment objectives are very similar and their investment
policies are generally alike. Furthermore, Acquiring Fund will actively continue
Target's business in the same manner that Target conducted it immediately before
the Reorganization. Accordingly, there will be business continuity.
Acquiring Fund not only will continue Target's historic business, but
Acquiring Fund also (1) has no plan or intention to sell or otherwise dispose of
any of the Assets, except for dispositions made in the ordinary course of its
business and dispositions necessary to maintain its status as a RIC, and (2)
expects to retain substantially all the Assets in the same form as it receives
them in the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make dispositions
thereof to maintain such status. Accordingly, there will be asset continuity as
well.
For all the foregoing reasons, we believe that the Reorganization will meet
the continuity of business requirement.
2. Continuity of Interest.
For purposes of issuing private letter rulings, the Service considers the
continuity of inter est requirement of Treas. Reg. ss. 1.368-1(b) satisfied if
ownership in an acquiring corporation on the part of a transferor corporation's
former shareholders is equal in value to at least 50% of the value of all the
formerly outstanding shares of the transferor corporation. Rev. Proc. 77-37,
supra; but see Rev. Rul. 56-345, 1956-2 C.B. 206 (continuity of interest was
held to exist in a reorganization of two RICs where immediately after the
reorganization 26% of the shares were redeemed in order to allow investment in a
third RIC); also see Reef Corp. v. Commissioner, 368 F.2d 125 (5th Cir. 1966),
cert. denied, 386 U.S. 1018 (1967) (a redemption of 48% of a transferor
corporation's stock was not a sufficient shift in proprietary interest to
disqualify a transaction as a reorganization under section 368(a)(2)(F) ("F
Reorganization"), even though only 52% of the transferor's shareholders would
hold all the transferee's stock); Aetna Casualty and Surety Co. v. U.S., 568
F.2d 811, 822-23 (2d Cir. 1976) (redemption of a 38.39% minority interest did
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 12
not prevent a transaction from qualifying as an F Reorganization); Rev. Rul.
61-156, 1961-2 C.B. 62 (a transaction qualified as an F Reorganization even
though the transferor's shareholders acquired only 45% of the transferee's
stock, while the remaining 55% of that stock was issued to new shareholders in a
public underwriting immediately after the transfer).
No minimum holding period for shares of an acquiring corporation is imposed
under the Code on the acquired corporation's shareholders. Rev. Rul. 66-23,
1966-1 C.B. 67, provides generally that "unrestricted rights of ownership for a
period of time sufficient to warrant the conclusion that such ownership is
definite and substantial" will suffice and that "ordinarily, the Service will
treat five years of unrestricted . . . ownership as a sufficient period" for
continuity of interest purposes.
A preconceived plan or arrangement by or among an acquired corporation's
shareholders to dispose of more than 50% of an acquiring corporation's shares
could be problematic. Shareholders with no such preconceived plan or
arrangement, however, are basically free to sell any part of the shares received
by them in the reorganization without fear of breaking continuity of interest,
because the subsequent sale will be treated as an independent transaction from
the reorganization.
Neither Fund (1) is aware of any plan or intention of Shareholders to
dispose of any portion of the Acquiring Fund Shares to be received by them in
the Reorganization or (2) anticipates dispositions thereof at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as an open-end investment company.
Consequently, each Fund expects that the percentage of Shareholder interests, if
any, that will be disposed of as a result of or at the time of the
Reorganization will be de minimis. Accordingly, we believe that the
Reorganization will meet the continuity of interest requirement of Treas. Reg.
ss. 1.368-1(b).
F. Distribution by Target.
Section 368(a)(2)(G)(i) provides that a transaction will not qualify as a C
reorganization unless the corporation whose properties are acquired distributes
the stock it receives and its other property in pursuance of the plan of
reorganization. Under the Plan -- which we believe constitutes a "plan of
reorganization" within the meaning of Treas. Reg. ss. 1.368-2(g) -- Target will
distribute all the Acquiring Fund Shares to its shareholders in constructive
exchange for their Target Shares; as soon as is reasonably practicable
thereafter, Target will be terminated. Accordingly, we believe that the
requirements of section 368(a)(2)(G)(i) will be satisfied.
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 13
G. Business Purpose.
All reorganizations must meet the judicially imposed requirements of the
"business purpose doctrine," which was established in Gregory v. Helvering, 293
U.S. 465 (1935), and is now set forth in Treas. Reg. ss.ss. 1.368-1(b), -1(c),
and -2(g) (the last of which provides that, to qualify as a reorganization, a
transaction must be "undertaken for reasons germane to the continuance of the
business of a corporation a party to the reorganization"). Under that doctrine,
a transaction must have a bona fide business purpose (and not a purpose to avoid
federal income tax) to constitute a valid reorganization. The substantial
business purposes of the Reorganization are described in the Proxy. Accordingly,
we believe that the Reorganization is being undertaken for bona fide business
purposes (and not a purpose to avoid federal income tax) and therefore meets the
require ments of the business purpose doctrine.
For all the foregoing reasons, we believe that the Reorganization will
constitute a reorganization within the meaning of section 368(a)(1)(C).
H. Both Funds are Parties to the Reorganization.
Section 368(b)(2) and Treas. Reg. ss. 1.368-1(f) provide that if one
corporation transfers substantially all of its properties to a second
corporation in exchange for all or a part of the voting stock of the second
corporation, then both corporations are parties to a reorganization. Target is
transferring substantially all of its properties to Acquiring Fund in exchange
for Acquiring Fund Shares. Accordingly, we believe that each Fund will be "a
party to a reorganization."
II. No Gain or Loss Will Be Recognized to Target.
Under sections 361(a) and (c), no gain or loss will be recognized to a
corporation that is a party to a reorganization (1) on the exchange of property,
pursuant to the plan of reorganization, solely for stock or securities in
another corporate party to the reorganization or (2) on the distribution to its
shareholders, pursuant to that plan, of stock in such other corporation that was
received by the distributing corporation in the exchange. (Such a distribution
is required by section 368(a)(2)(G)(i) for a reorganization to qualify as a C
reorganization.) Section 361(c)(4) provides that specified provisions requiring
recognition of gain on certain distributions shall not apply to a distribution
described in (2) above.
Section 357(a) provides in pertinent part that, except as provided in
section 357(b), if a taxpayer receives property that would be permitted to be
received under section 361 without recognition of gain if it were the sole
consideration and, as part of the consideration, another party to the exchange
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 14
assumes a liability of the taxpayer or acquires from the taxpayer property
subject to a liability, then that assumption or acquisition shall not be treated
as money or other property and shall not prevent the exchange from being within
section 361. Section 357(b) applies where the principal purpose of the
assumption or acquisition was a tax avoidance purpose or not a bona fide
business purpose.
As noted above, the Reorganization will constitute a C reorganization, each
Fund will be a party to a reorganization, and the Plan constitutes a plan of
reorganization. Target will exchange the Assets solely for the Acquiring Fund
Shares and Acquiring Fund's assumption of the Liabilities and then will be
terminated pursuant to the Plan, distributing those shares to its share holders
in constructive exchange for their Target Shares. As also noted above, we
believe that the Reorganization is being undertaken for bona fide business
purposes (and not a purpose to avoid federal income tax); we also do not believe
that the principal purpose of Acquiring Fund's assumption of the Liabilities is
avoidance of federal income tax on the proposed transaction. Accordingly, we
believe that no gain or loss will be recognized to Target on the
Reorganization.3/
III. No Gain or Loss Will Be Recognized to Acquiring Fund.
Section 1032(a) provides that no gain or loss will be recognized to a
corporation on the receipt by it of money or other property in exchange for its
shares. Acquiring Fund will issue the Acquiring Fund Shares to Target in
exchange for the Assets, which consist of money and securities. Accordingly, we
believe that no gain or loss will be recognized to Acquiring Fund on the
Reorganization.
IV. Acquiring Fund's Basis for the Assets Will Be a Carryover Basis, and Its
Holding Period Will Include Target's Holding Period.
Section 362(b) provides that property acquired by a corporation in
connection with a reorganization will have the same basis in that corporation's
hands as the basis of the property in the transferor corporation's hands
immediately before the exchange, increased by any gain recognized
- --------
3/ Notwithstanding anything herein to the contrary, no opinion is expressed as
to the effect of the Reorganization on the Funds or any Shareholder with respect
to any asset (including certain options, futures, and forward contracts included
in the Assets) as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year (or on
the termination or transfer thereof) under a mark-to-market system of
accounting.
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 15
to the transferor on the transfer. As noted above, the Reorganization will
constitute a C reorganization and Target will recognize no gain on the
Reorganization under section 361(a). Accordingly, we believe that Acquiring
Fund's basis for the Assets will be the same as the basis thereof in Target's
hands immediately before the Reorganization.
Section 1223(2) provides that where property acquired in an exchange has a
carryover basis, the property will have a holding period in the hands of the
acquiror that includes the holding period of the property in the transferor's
hands. As stated above, Acquiring Fund's basis for the Assets will be a
carryover basis. Accordingly, we believe that Acquiring Fund's holding period
for the Assets will include Target's holding period therefor.
V. No Gain or Loss Will Be Recognized to a Shareholder.
Under section 354(a), no gain or loss is recognized to a shareholder who
exchanges shares for other shares pursuant to a plan of reorganization, where
the shares exchanged, as well as the shares received, are those of a corporation
that is a party to the reorganization. As stated above, the Reorganization will
constitute a C reorganization, the Plan constitutes a plan of reorganization,
and each Fund will be a party to a reorganization. Accordingly, we believe that
under section 354 a Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund Shares
pursuant to the Reorganization.
VI. A Shareholder's Basis for Acquiring Fund Shares Will Be a Substituted
Basis, and its Holding Period therefor Will Include its Holding Period for
its Target Shares.
Section 358(a)(1) provides, in part, that in the case of an exchange to
which section 354 applies, the basis of any shares received in the transaction
without the recognition of gain is the same as the basis of the property
transferred in exchange therefor, decreased by, among other things, the fair
market value of any other property and the amount of any money received in the
transaction and increased by the amount of any gain recognized on the exchange
by the share holder.
As noted above, the Reorganization will constitute a C reorganization and
under sec tion 354 no gain or loss will be recognized to a Shareholder on the
constructive exchange of its Target Shares for Acquiring Fund Shares in the
Reorganization. No property will be distributed to the Shareholders other than
the Acquiring Fund Shares, and no money will be distributed to them pursuant to
the Reorganization. Accordingly, we believe that a Shareholder's basis for the
<PAGE>
Bull & Bear Funds I, Inc.
February 20, 1996
Page 16
Acquiring Fund Shares to be received by it in the Reorganization will be the
same as the basis for its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares.
Under section 1223(1), the holding period of property received in an
exchange includes the holding period of the property exchanged therefor if the
acquired property has, for the purpose of determining gain or loss, the same
basis in the holder's hands as the property exchanged therefor ("substituted
basis") and such property was a capital asset. As noted above, a Shareholder
will have a substituted basis for the Acquiring Fund Shares it receives in the
Reorganization; accordingly, provided that the Shareholder held its Target
Shares as capital assets on the Closing Date, we believe its holding period for
those Acquiring Fund Shares will include its holding period for those Target
Shares.
We hereby consent to this opinion accompanying the Registration Statement
and to the references to our firm under the captions "Synopsis -- Federal Income
Tax Consequences of the Reorganization" and "The Proposed Transaction -- Federal
Income Tax Considerations" in the Proxy.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Theodore L. Press
---------------------
Theodore L. Press
By: /s/ Joel D. Almquist
--------------------
Joel D. Almquist
Exhibit 14
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the Statement of
Additional Information constituting part of this Registration Statement on Form
N-14 ("Registration Statement") of our reports dated January 19, 1996 relating
to the financial statements and financial highlights of Bull & Bear Quality
Growth Fund and Bull & Bear U.S. and Overseas Fund. We also consent to the
incorporation by reference of our report into the Prospectus/Proxy Statement
constituting part of the Registration Statement and to the references to our
firm in the Registration Statement.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 14, 1996
Exhibit 17(a)
1933 Act Registration 33-6898
1940 Act Registration 811-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. 3 |X|
Pre-Effective Amendment No. |_|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No.
(Check appropriate box or boxes.)
Bull & Bear Overseas Fund Ltd.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in Charter)
11 Hanover Square, New York, New York 10005
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (212)785-0900
Perez C. Ehrich, Esq. Robert D. Anderson, Vice Chairman
Townley & Updike Bull & Bear International
Advisers, Inc.
405 Lexington Avenue 11 Hanover Square
New York, New York 10174 New York, New York 10005
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement has become effective.
<PAGE>
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant hereby registers an indefinite number of shares pursuant to
this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Bull & Bear
U.S. and Overseas Fund Annual Report and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> U.S. and Overseas Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 9,040,632
<INVESTMENTS-AT-VALUE> 10,614,596
<RECEIVABLES> 32,476
<ASSETS-OTHER> 4,285
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,651,357
<PAYABLE-FOR-SECURITIES> 269,125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 574,453
<TOTAL-LIABILITIES> 843,578
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,251,242
<SHARES-COMMON-STOCK> 1,173,429
<SHARES-COMMON-PRIOR> 1,193,435
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17,859)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,574,396
<NET-ASSETS> 9,807,779
<DIVIDEND-INCOME> 63,812
<INTEREST-INCOME> 3,045
<OTHER-INCOME> 0
<EXPENSES-NET> 342,296
<NET-INVESTMENT-INCOME> (275,439)
<REALIZED-GAINS-CURRENT> 824,509
<APPREC-INCREASE-CURRENT> 1,481,881
<NET-CHANGE-FROM-OPS> 2,030,951
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 574,671
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,764,028
<NUMBER-OF-SHARES-REDEEMED> 1,848,587
<SHARES-REINVESTED> 64,553
<NET-CHANGE-IN-ASSETS> 1,353,710
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 96,092
<INTEREST-EXPENSE> 4,645
<GROSS-EXPENSE> 375,847
<AVERAGE-NET-ASSETS> 9,668,799
<PER-SHARE-NAV-BEGIN> 7.08
<PER-SHARE-NII> (.23)
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.49)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.36
<EXPENSE-RATIO> 3.55
<AVG-DEBT-OUTSTANDING> 47,539
<AVG-DEBT-PER-SHARE> .04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Bull & Bear
Quality Growth Annual Report and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> Quality Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,214,390
<INVESTMENTS-AT-VALUE> 2,324,241
<RECEIVABLES> 1,746
<ASSETS-OTHER> 16,436
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,342,423
<PAYABLE-FOR-SECURITIES> 63,850
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,809
<TOTAL-LIABILITIES> 126,659
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,105,913
<SHARES-COMMON-STOCK> 177,817
<SHARES-COMMON-PRIOR> 311,708
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 109,851
<NET-ASSETS> 2,215,764
<DIVIDEND-INCOME> 51,131
<INTEREST-INCOME> 16,150
<OTHER-INCOME> 0
<EXPENSES-NET> 127,375
<NET-INVESTMENT-INCOME> (60,094)
<REALIZED-GAINS-CURRENT> 1,054,200
<APPREC-INCREASE-CURRENT> (351,567)
<NET-CHANGE-FROM-OPS> 642,539
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 461,763
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,151
<NUMBER-OF-SHARES-REDEEMED> 396,943
<SHARES-REINVESTED> 23,901
<NET-CHANGE-IN-ASSETS> (1,935,516)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,307)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 890
<GROSS-EXPENSE> 156,722
<AVERAGE-NET-ASSETS> 3,608,211
<PER-SHARE-NAV-BEGIN> 13.32
<PER-SHARE-NII> (.24)
<PER-SHARE-GAIN-APPREC> 2.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 3.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.46
<EXPENSE-RATIO> 3.71
<AVG-DEBT-OUTSTANDING> 10,106
<AVG-DEBT-PER-SHARE> .04
</TABLE>
