BULL & BEAR QUALITY GROWTH FUND ANNUAL REPORT
February 15, 1996
Fellow Shareowners:
We are pleased to submit this Annual Report and to welcome the many new
shareholders who have joined Bull & Bear Quality Growth Fund since our last
report by opening regular, Gifts/Transfers to Minors and qualified retirement
plan accounts. Of special interest, shareowner investments through Bull & Bear
IRA, SEP-IRA, Profit Sharing/Money Purchase, 403 (b) and Keogh accounts
represent 24% of the Fund's total net assets.
The Fund's strategy in 1995 was to generally have between 65% and 100% of
assets invested in a portfolio of securities of companies whose established
records of growth of earnings and dividends are believed to have long term
potential to increase in the future. Defensive positions were maintained from
time to time when it was deemed advisable to help preserve capital. For the
year, Quality Growth Fund had a total return of +16.25%.
The Board of Directors has approved an Agreement and Plan of Reorganization
and Termination (the "Reorganization Agreement"), under which the Fund would be
merged into Bull & Bear U.S. and Overseas Fund, which has an investment
objective of seeking the highest possible total return on its assets from long
term growth of capital and from income principally through a portfolio of
securities of U.S. and overseas issuers. The reorganization is subject to
approval of Fund shareholders at a Special Meeting currently scheduled for April
25, 1996. Proxy materials describing the Reorganization more fully will be
available without charge when they are mailed to shareholders by calling
Investor Service Center 1-800-847-4200.
If you have any questions or would like information on any of the Bull &
Bear Funds, the Bull & Bear No-Fee IRA(R) or opening a discount brokerage
account at Bull & Bear Securities, where you can earn American Airlines(R)
AAdvantage(R) miles on every trade, we would be very pleased to hear from you.
Just call 1-800-847-4200, and an Investor Service Representative will be glad to
assist you, as always, without any obligation on your part.
Sincerely,
Bassett S. Winmill Robert D. Anderson
Chairman, Investment Policy Committee Vice Chairman
Portfolio Manager
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<TABLE>
<S> <C> <C>
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INCOME FUNDS - o Bull & Bear A high quality money market fund investing in U.S.
MONEY MARKET, Dollar Reserves Government securities. Income is generally free
U.S. GOVERNMENT, from state income and intangible property taxes.
MUNICIPAL AND (For Bull & Bear Performance Plus(sm) discount
GLOBAL brokerage accounts, the check writing minimum is
$100.)
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o Monthly o Bull & Bear Investing for a high level of current income,
Dividends U.S. Government liquidity and safety of principal.
o Free, Unlimited Securities Fund
Check Writing ---------------------------------------------------------------------------------------------------------
($250 minimum o Bull & Bear Investing for the highest possible income exempt
per check) Municipal Income Fund from Federal income tax that is consistent with
preservation of principal.
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o Bull & Bear Investing for a high level of income from a global
Global Income Fund portfolio of primarily investment grade fixed
income securities.
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GROWTH FUNDS - o Bull & Bear Invests worldwide for the highest possible total
U.S., GLOBAL U.S. and Overseas Fund return.
AND PRECIOUS ---------------------------------------------------------------------------------------------------------
METALS o Bull & Bear Invests aggressively for maximum capital
Special Equities Fund appreciation.
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o Bull & Bear Seeks long term capital appreciation in investments
Gold Investors with the potential to provide a hedge against
inflation and preserve the purchasing power of the
dollar.
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Call our toll-free number for a prospectus containing more complete information,
including charges and expenses. Please read it carefully before you invest.
====================================================================================================================================
DISCOUNT o Bull & Bear Investors receive the investment information they need
BROKERAGE Securities, Inc. and the low commissions they expect. Commission
SERVICES savings of up to 84% and more over full cost firms
and guaranteed 20% lower than Charles Schwab &
Co. on every stock, bond and option trade.
(Transactions are subject to a low $31 minimum
commission; comparisons are based on a January 1996
survey of standard telephone orders; full cost firms
and larger discount brokers may offer additional
Call Toll Free services not available from Bull & Bear Securities and
1-800-VIP-4200 rates may vary markedly for other types of products.)
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Total Return Performance. For the year ended December 31, 1995, Bull & Bear Quality
Growth Fund's total return was +16.29%. Past performance does not guarantee future
results. Investment return will fluctuate, so shares when redeemed may be worth more or
less than their cost.
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BULL & BEAR QUALITY GROWTH FUND
Schedule of Portfolio Investments - December 31, 1995
MARKET
SHARES VALUE
- ------ -----
COMMON STOCKS (89.7%)
Abrasives and Miscellaneous Products (2.9%)
1,000 Minnesota Mining & Manufacturing Co................ $ 66,250
----------
Airlines (3.2%)
1,000 AMR Corp.*......................................... 74,250
----------
Automatic Controls (4.2%)
2,000 Honeywell, Inc..................................... 97,250
----------
Automobiles (3.6%)
1,500 Chrysler Corp...................................... 83,063
----------
Banks (7.4%)
1,200 Citicorp........................................... 80,700
3,000 Wilmington Trust Co................................ 92,625
----------
173,325
Chemicals (3.0%)
1,000 Du Pont (E.I.) De Nemours & Co..................... 69,875
----------
Computers & Office Equipment (7.7%)
2,000 Compaq Computer Corp.*............................. 96,000
1,000 Hewlett-Packard Co................................. 83,750
----------
179,750
Defense Contractor (4.1%)
2,000 Raytheon Corp...................................... 94,500
----------
Diversified (3.4%)
1,000 Loews Corp......................................... 78,375
----------
Energy Services (3.0%)
1,000 Schlumberger Ltd................................... 69,250
----------
Energy Sources (2.7%)
2,000 Suncor Inc......................................... 63,750
----------
QUALITY GROWTH FUND
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MARKET
SHARES VALUE
- ------ -----
Financial Services (11.5%)
1,000 Federal National Mortgage Association.............. $ 124,125
3,000 Pioneer Group Inc.................................. 81,750
3,000 Schwab (Charles) Corp.............................. 60,375
----------
266,250
Food & Beverages (3.9%)
2,000 McDonald's Corp.................................... 90,250
----------
Household & Personal Care Products (8.0%)
2,000 Gillette Co........................................ 104,250
1,000 Procter & Gamble Co................................ 83,000
----------
187,250
Insurance (7.5%)
2,000 Allstate Corp...................................... 82,250
3,000 Renaissance Re Holdings Ltd........................ 91,125
----------
173,375
Pharmaceutical (6.4%)
2,000 Abbott Laboratories................................ 83,500
1,000 Merck & Co., Inc................................... 65,750
----------
149,250
Semiconductors & Related Devices (3.3%)
1,500 Texas Instruments.................................. 77,625
----------
Tires and Rubber Products (3.9%)
2,000 Goodyear Tire & Rubber Co.......................... 90,750
----------
Total Common Stocks (Cost: $1,974,537) 2,084,388
----------
Par Value U.S. Government Agency (10.3%)
- ---------
$240,000 Federal National Mortgage Association, due 1/5/96 239,853
----------
Total U.S. Governmental Agency (Cost: $239,853)
Total Investments (Cost: $2,214,390) (100.0%). $2,324,241
==========
* Indicates non-income producing security.
See accompanying notes to financial statements.
QUALITY GROWTH FUND
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STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS:
Investments at market value (cost: $2,214,390) (note 1)........ $2,324,241
Cash........................................................... 3,635
Receivables:
Dividends.................................................... 1,746
Deferred organizational expenses (note 1)...................... 12,801
----------
Total assets............................................... 2,342,423
----------
LIABILITIES:
Payables:
Investment securities purchased.............................. 63,850
Organizational expenses...................................... 18,670
Fund shares redeemed......................................... 1,645
Accrued expenses............................................... 42,494
----------
Total liabilities............................................ 126,659
----------
NET ASSETS: (applicable to 177,817 outstanding shares:
250,000,000 shares of $.01 par value authorized)............... $2,215,764
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($2,215,764 / 177,817)......................................... $12.46
======
At December 31, 1995, net assets consisted of:
Paid-in capital................................................ $2,105,913
Net unrealized appreciation on investments..................... 109,851
----------
$2,215,764
See accompanying notes to financial statements.
QUALITY GROWTH FUND
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STATEMENT OF OPERATIONS
Year Ended December 31, 1995
INVESTMENT INCOME:
Dividends...................................................... $ 51,131
Interest....................................................... 16,150
----------
Total investment income............................... 67,281
----------
EXPENSES:
Distribution (note 3).......................................... 36,082
Transfer agent................................................. 33,407
Registration (note 3).......................................... 25,490
Professional (note 3).......................................... 22,445
Custodian...................................................... 11,191
Shareholder administration (note 3)............................ 10,524
Printing....................................................... 8,407
Amortization of organization................................... 4,668
Directors...................................................... 2,113
Other.......................................................... 2,395
----------
Total expenses............................................. 156,722
Custodian credits (note 4)................................. (7,813)
Expenses reimbursed (note 3)............................... (21,534)
----------
Net expenses............................................... 127,375
----------
Net investment income (loss)............................... (60,094)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from security transactions................... 1,054,200
Unrealized appreciation (depreciation) of
investments during the period................................ (351,567)
----------
Net realized and unrealized gain on investments............ 702,633
----------
Net increase in net assets resulting from operations....... $ 642,539
==========
See accompanying notes to financial statements.
QUALITY GROWTH FUND
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STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment loss ........................................................................ $ (60,094) $ (51,498)
Net realized gain (loss) from security transactions ........................................ 1,054,200 (2,267)
Unrealized depreciation of investments during the period ................................... (351,567) (583,344)
----------- -----------
Net increase (decrease) in net assets resulting from operations ........................... 642,539 (637,109)
DISTRIBUTIONS TO SHAREHOLDERS:
Distribution from net realized gains ($3.02) ............................................... (461,763) --
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net assets resulting from capital share transactions (a) ............ (2,116,292) 3,730,106
----------- -----------
Total increase (decrease) in net assets .................................................. (1,935,516) 3,092,997
NET ASSETS
Beginning of period ........................................................................ 4,151,280 1,058,283
----------- -----------
End of period .............................................................................. $ 2,215,764 $ 4,151,280
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(a) Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
Shares Value Shares Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold ............................................ 239,151 $ 3,478,098 616,237 $ 8,484,052
Shares issued in acquisition of Fund (note 5) .......... -- -- 351,587 5,147,427
Shares issued in reinvestment of distributions ......... 23,901 296,849 -- --
Shares redeemed ........................................ (396,943) (5,891,239) (729,274) (9,901,373)
----------- ----------- ----------- -----------
Net increase (decrease) ................................ (133,891) $(2,116,292) 238,550 $ 3,730,106
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
QUALITY GROWTH FUND
<PAGE>
Notes to Financial Statements
(1) The Fund is a non-diversified series of common stock of Bull & Bear Funds I,
Inc. (the "Company), which is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Bull & Bear U.S.
and Overseas Fund is the other series of the Company. The Fund's investment
objective is to seek a high total return primarily through growth of capital,
and secondarily, income. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. With respect to security valuation, securities traded on a national
securities exchange and securities traded on Nasdaq National Market System
("NMS") are valued at the last reported sales price on the day the valuations
are made. Such securities that are not traded on a particular day and securities
traded in the over-the-counter market that are not on NMS are valued at the mean
between the current bid and asked prices. Securities for which quotations are
not readily available and other assets will be valued at fair value as
determined in good faith by or under the direction of the Board of Directors.
Debt obligations with remaining maturities of 60 days or less are valued at cost
adjusted for amortization of premiums and accretion of discounts. Investment
transactions are accounted for on the trade date (date the order to buy or sell
is executed). Dividend income and distributions to shareholders are recorded on
the ex-dividend date and interest income is recorded on the accrual basis.
Expenses incurred in connection with the Fund's organization and registration
have been assumed by the Fund and will be deferred and amortized on a
straight-line basis over a period not greater than five years. In preparing
financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) It is the Fund's intention to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all its taxable investment income and net capital gains, if any,
after utilization of any carryforward, to its shareholders and therefore no
Federal income tax provision is required. Based on Federal income tax cost of
$2,214,390, gross unrealized appreciation and gross unrealized depreciation were
$140,041 and $30,190, respectively, at December 31, 1995. Distributions paid to
shareholders during the year ended December 31, 1995 differ from net realized
gains from security transactions as determined for financial reporting purposes
principally as a result of utilization of capital loss carryforwards.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives no investment management fee for its services if the Fund's net assets
are less than $5 million. Thereafter, the Investment Manager receives a fee,
payable monthly, based on the average daily net assets of the Fund at the annual
rate of 1% of assets up to $10 million, .875% from $10 million to $30 million,
.75% from $30 million to $150 million, .625% from $150 million to $500 million
and .5% over $500 million. The Investment Manager has undertaken that the
operating expenses of the Fund for each fiscal year (including management fees
but excluding taxes, interest, brokerage commissions and distribution plan
expenses), expressed as a percentage of average daily net assets, will not
exceed the lowest rate prescribed by any state in which shares of the Fund are
qualified for sale. Currently such limitation is 2.5% of the first $30 million
of such assets, 2% of the next $70 million and 1.5% of the remaining net assets.
If the Fund's expenses exceed such rates, the Investment Manager will reimburse
the Fund for any excess. Reimbursement for the year ended December 31, 1995 was
$21,534. Certain officers and directors of the Fund are officers and directors
of the Investment Manager and Investor Service Center, Inc. (formerly Bull &
Bear Service Center, Inc.), the Fund's Distributor. For the year ended December
31, 1995, Bull & Bear Securities, Inc., an affiliate of the Investment Manager,
received commissions of $11,341 for brokerage services. The Fund reimbursed the
Investment Manager $9,650 for providing certain administrative and accounting
services at cost.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"). Pursuant to the Plan, the Fund pays
the Distributor a distribution fee in an amount of three-quarters of one percent
per annum of the Fund's average daily net assets and a service fee in an amount
of one-quarter of one percent per annum of the Fund's average daily net assets.
The fee for service activities is intended to cover personal services provided
to shareholders in the Fund and the maintenance of shareholder accounts. The fee
for distribution activities is to cover all other activities and expenses
primarily intended to result in the sale of the Fund's shares. Investor Service
Center also received $10,524 for shareholder administration services which it
provided to the Fund at cost during the year ended December 31, 1995.
(4) Purchases and proceeds of sales of securities other than short term
investments aggregated $4,915,933 and $7,650,456, respectively. Under an
agreement with the custodian, custodian fees are reduced by credits for cash
balances. Such reductions amounted to $7,813 during the year ended December 31,
1995.
(5) On January 21, 1994, the Fund acquired all of the assets and liabilities of
Bull & Bear Financial News Composite Fund, Inc. in exchange for 351,587 shares
(valued at $5,147,427) of the Fund that were subsequently distributed to
shareholders of Bull & Bear Financial News Composite Fund, Inc. The exchange had
no effect on the net asset value per share of the Fund. The net assets of Bull &
Bear Financial News Composite Fund, Inc., as of January 21, 1994, were
$5,147,427 consisting of paid-in capital of $4,539,498, unrealized appreciation
QUALITY GROWTH FUND
<PAGE>
of investments of $1,035,704, and accumulated net realized loss on investments
of $427,775. The net assets of the Fund immediately after the acquisition
amounted to $6,018,680.
(6) The Fund had an uncommitted bank line of credit for temporary or emergency
purposes which expired. For the year ended December 31, 1995, the weighted
average interest rate was 8.7% based on the balances outstanding during the year
and the weighted average amount outstanding was $10,106.
(7) The Board of Directors has approved an Agreement and Plan of Reorganization
and Termination (the "Reorganization Agreement"), under which the Fund would be
merged into Bull & Bear U.S. and Overseas Fund, which has an investment
objective of seeking 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. Approval of the Reorganization
Agreement will be submitted to the shareholders of the Fund for their meeting
scheduled in April, 1996.
QUALITY GROWTH FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended October 1, 1993*
December 31, December 31, to December 31,
1995 1994 1993
------------ ------------ ----------------
<S> <C> <C> <C>
PER SHARE DATA***
Net asset value at beginning of period ............................... $ 13.32 $ 14.47 $ 15.00
--------- --------- ---------
Income from investment operations:
Net investment loss ................................................ (.24) (.17) (0.05)
Net realized and unrealized gain (loss) on investments ............. 2.40 (.98) (0.48)
--------- --------- ---------
Total from investment operations ................................. 2.16 (1.15) (0.53)
--------- --------- ---------
Less distributions:
Distributions from net realized gains on investments ............... (3.02) -- --
--------- --------- ---------
Net asset value at end of period ..................................... $ 12.46 $ 13.32 $ 14.47
========= ========= =========
TOTAL RETURN ......................................................... 16.29% (7.95)% (3.53)%
========= ========= =========
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) .......................... $ 2,216 $ 4,151 $ 1,058
========= ========= =========
Ratio of expenses to average net assets (a)(b) ....................... 3.71% 3.60% 3.50%**
========= ========= =========
Ratio of net investment loss to average net assets(C) ................ 1.66% 1.14% 2.29%**
========= ========= =========
Portfolio turnover rate .............................................. 161% 82% 19%
========= ========= =========
</TABLE>
(a) Ratio prior to reimbursement by the Investment Manager was 4.30%, 4.70% and
11.61%** for the periods ended December 31, 1995, 1994 and 1993,
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 2.25%, 2.24% and
10.40%** for the periods ended December 31, 1995, 1994 and 1993,
respectively.
* Commencement of operations.
** Annualized.
*** Per share net investment loss and net realized and unrealized gain (loss)
on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
QUALITY GROWTH FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Bull & Bear Quality Growth Fund:
We have audited the accompanying statements of assets and liabilities of
Bull & Bear Quality Growth Fund, including the schedule of portfolio investments
as of December 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two periods
then ended, and the financial highlights for each of the three periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bull & Bear Quality Growth Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two periods then ended, and the financial highlights for each of the three
periods presented, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 19, 1996
QUALITY GROWTH FUND
