U.S. AND OVERSEAS FUND
Investing Worldwide
for the Highest Possible
Total Return
Annual Report
December 31, 1998
11 Hanover Square, New York, NY 10005
1-888-503-FUND for Investment Information
1-888-503-VOICE for Shareholder Services
www.mutualfunds.net
February 10, 1999
Fellow Shareholders:
It is a pleasure to welcome our shareholders who have opened a new
account during the year, in many cases taking advantage of our Investor Service
Center No-Fee Traditional, Roth and Education IRA.
Review and Outlook
International financial markets experienced chaotic and disorderly
conditions during the second half of the year. A variety of events contributed
to the instability in financial markets. The devaluation of the Russian ruble
and the Russian government's de facto default on its debt was a critical event.
Dramatic losses were incurred by a variety of market participants, including
banks and securities dealers, which threatened the liquidity and functioning of
financial markets. Losses at one large highly leveraged hedge fund required
intervention by the Federal Reserve to organize a private restructuring of the
fund.
This period also witnessed an abrupt collapse in equity prices,
which was undoubtedly a concern for the Federal Reserve. In response, the
Federal Reserve pre-emptively lowered its Federal Funds rate target by 0.25% at
two regularly scheduled fall meetings, and by an additional 0.25% in an unusual
inter-meeting adjustment. Also, the negative "wealth effect" associated with
sharp declines in personal net worth could be expected to reduce consumer
spending, which accounts for two-thirds of economic growth. The injection of
liquidity by the Federal Reserve and central bankers throughout the developed
world restored financial market stability and caused a significant decline in
U.S. interest rates. Since late autumn, as financial markets have become more
orderly, and the domestic economy has continued to expand, interest rates have
risen moderately.
Other events overseas play an increasingly important role in
influencing global markets. The advent of the Euro as a reserve currency, and
the economic unification of much of the continent should be positive for growth,
even as many countries struggle to offset declines in manufactured exports to
less developed countries. Economic performance has been mixed in Asia, with
South Korean markets recovering while the Japanese economy remains mired. The
ultimate impact of Brazil's loss of reserves and devaluation is uncertain, but
it will undoubtedly retard growth throughout the Americas in 1999. Finally, no
one can accurately project the impact and problems related to computer readiness
for the year 2000.
While we continue to favor dollar denominated investments, with
almost half the Fund's portfolio in U.S. securities at year-end, we believe that
a further increase in the U.S. trade deficit will lead to dollar weakness in
1999, and look to adjust our holdings accordingly. Given these and the other
conditions described above, the Fund's strategy was to remain invested in common
stocks using a discipline approach, while also employing futures depending on
market conditions. Generally, the Fund attempts to identify steadily growing
companies with reasonable valuations, and to hold their equity securities for
long term appreciation and/or income. We avoid companies that lack solid rates
of growth in revenues, net income, earnings per share, and shareholders' equity.
Yet, even if a company does meet our growth criteria, it must also have a
reasonable valuation in terms of price/earnings, price/sales, price/cash flow,
and similar ratios. While the Fund's total return for 1998 was +1.18%, it had a
strong finish to the year with a total return gain of +18.99% for the fourth
quarter, which we will be seeking to build on in 1999.
At this point in time, we do not anticipate a change in Federal
Reserve Policy. Should imbalances re-emerge in global financial markets, we have
every confidence that the Federal Reserve and central bankers in developed
countries will act decisively to contain the damage.
The Fund will continue to invest based on its consistent discipline
in a global portfolio of companies with steadily growing earnings, with the goal
of maximizing total return for shareholders.
A Convenient Way to Grow your Account
<PAGE>
In terms of seeking to achieve your long range financial goals, we
especially favor building your account on a regular basis, which can be done
safely, automatically and conveniently through the Investor Service Center Bank
Transfer Plan, the Investor Service Center Salary Investing Plan, and/or the
Investor Service Center Government Direct Deposit Plan. For information on any
of these free services simply give us a call and we will help you get started.
If you have any questions or would like information on any of the
Investor Service Center Funds, the Investor Service Center No-Fee Traditional,
Roth or Education IRA, we would be very pleased to hear from you. Just call
1-888-503-FUND (3863), and an Investor Service Representative will be glad to
assist you, as always, without any obligation on your part.
Sincerely,
Robert D. Anderson Thomas B. Winmill
Vice Chairman President
Mutual Funds
Dollar Reserves
A high quality money market fund investing in U.S. Government
securities. Income is generally free from state income and intangible personal
property taxes. Free, unlimited check writing with only a $250 minimum per
check.
Gold Investors
Seeks long term capital appreciation in investments with the
potential to provide a hedge against inflation and preserve the purchasing power
of the dollar.
Special Equities Fund
Invests aggressively for maximum capital appreciation.
U.S. and Overseas Fund
Invests worldwide for the highest possible total return.
Closed-end investment companies
Global Income Fund (symbol: GIF)
Investing for a high level of income from a global portfolio of
primarily investment grade fixed income securities.
Tuxis Corporation (symbol: TUX)
Investing for an attractive level of long term return on an after
tax basis, with at least 50% of total assets in municipal securities and the
balance in selected growth stocks.
U.S. Government Securities Fund (symbol: BXL)
Invests for a high level of current income, liquidity, safety of
principal by investing primarily in U.S. Government securities, and may invest
up to 35% of its total assets in common stocks and other equity securities.
Call toll-free 1-888-503-FUND (3863) or visit www.mutualfunds.net for a
prospectus containing more complete information, including charges and expenses.
Please read it carefully before you invest or send money.
Total Return Performance. For periods ended 12/31/98, Bull & Bear U.S. and
Overseas Fund's total return for one year was 1.18%, average annual total return
for the past five years was 4.12%, and for the past ten years was 6.94%. Past
performance does not guarantee future results. Investment return will fluctuate,
so shares when redeemed may be worth more or less than their cost. Dollar cost
averaging does not assure a profit or protect against loss in a declining
market, and investors should consider their ability to make purchases when
prices are low.
<PAGE>
BULL & BEAR U.S. AND OVERSEAS FUND
Schedule of Portfolio Investments - December 31, 1998
Shares Market Value
COMMON STOCKS (93.9%)
Brazil (1.0%)
1,920 Oce N.V. ADR $ 68,160
Canada (10.7%)
2,100 Bank of Montreal 84,262
15,000 Counsel Corporation* 118,125
2,900 Enbridge Inc. 133,219
11,900 International Comfort Products Corp*. 95,200
3,070 Quebecor Printing Inc. 66,581
5,000 Royal Bank of Canada 249,375
746,762
Colombia (.8%)
2,900 Banco Ganadero S.A. ADR 58,544
France (6.9%)
4,500 Axa-UAP ADR 325,125
3,200 Total S.A. ADR 159,200
484,325
Hong Kong (1.0%)
5,760 Nam Tai Electronics, Inc. 66,600
Ireland (6.3%)
2,000 Allied Irish Banks plc ADR 20,750
2,400 CRH plc ADR 216,000
436,750
Italy (2.6%)
1,700 ENI S.p.A. ADR 115,175
3,900 Fiat S.p.A. ADR 68,738
183,913
Japan (2.2%)
3,350 Canon, Inc. ADR 72,025
1,190 Honda Motor Co., Ltd. ADR 79,432
151,457
Netherlands (7.4%)
2,080 Akzo Nobel N.V. ADR 92,820
6,564 Koninklijke Ahold N.V. ADR 242,868
1,200 Velcro Industries N.V. 178,800
514,488
Portugal (1.1%)
2,600 Banco Comercial Portugues, S.A. ADR 78,975
South Korea (1.0%)
4,480 Korea Electric Power Corp. ADR 70,280
United Kingdom (5.9%)
14,200 Cronos Group* $ 90,525
5,000 Tomkins plc ADR 100,000
3,600 WPP Group plc ADR 222,300
412,825
United States (46.7%)
3,260 Benchmark Electronics, Inc.*. 119,397
5,700 Chase Corp. 74,812
2,600 CTS Corp. 113,100
4,650 Engineered Support Systems, Inc. 69,169
3,590 Essef Corp.* 69,781
5,300 Expeditors International of Washington, Inc 222,600
3,640 Express Scripts, Inc. Class A* 244,335
12,600 Gencor Industries, Inc. 116,550
3,480 Genlyte Group Inc.* 65,250
15,000 Goody's Family Clothing, Inc.* 150,469
1,520 Ingram Micro Inc.* 53,010
12,220 Interface, Inc. 113,417
3,200 Jabil Circuit, Inc.* 238,800
8,400 Mail-Well, Inc.* 96,075
2,870 Miami Computer Supply Corp.* 70,853
5,530 Tarrant Apparel Group * 219,126
2,100 Teleflex Inc. 95,812
4,400 Tower Automotive, Inc.* 109,725
9,600 Trans World Entertainment Corp.* 183,000
2,500 United Technologies Corp. 271,875
1,740 Universal Health Services, Inc. Class B 90,263
7,513 Virco Manufacturing Corp. 138,051
2,780 Wal-Mart Stores, Inc. 226,396
4,500 Westaff Inc.* 28,125
3,750 Wynn's International, Inc. 82,969
3,262,960
Total Common Stocks (cost: $5,868,852) 6,536,039
Closed-End Funds (5.7%)
10,000 European Warrant Fund Inc. 171,875
10,800 INVESCO Global Health Sciences Fund 226,898
Total Closed-End funds (cost: $362,542) 398,773
Par Value
Short Term Investments (.4%)
$ 30,000 U.S. Treasury Bill, due 1/21/99 (cost: $29,924) (1) 29,924
Total Investments (cost: $6,261,318) (100.0%) $6,964,736
* Indicates non-income producing security.
(1) Pledged as collateral for open futures contract at December 31, 1998.
See accompanying notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS:
Investments at market value
(cost: $6,261,318) (note 1) ..........................$6,964,736
Cash ............................................................. 403,529
Dividend receivable .............................................. 7,538
Variation margin receivable ...................................... 1,700
Other assets ..................................................... 1,042
Total assets ................................................... 7,378,545
LIABILITIES:
Accrued expenses ................................................. 31,298
Accrued management and distribution fees ......................... 7,367
Total liabilities .............................................. 38,665
NET ASSETS: (applicable to 1,024,356
outstanding shares: 250,000,000 shares
of $.01 par value authorized) ..............$7,339,880
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
($7,339,880 / 1,024,356) ......................................... $7.17
At December 31, 1998, net assets consisted of:
Paid-in capital ..................................................$6,586,598
Accumulated net realized gain on investments ..................... 28,142
Net unrealized appreciation on investments,
foreign currencies and futures ............................... 725,140
$7,339,880
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
INVESTMENT INCOME:
Dividends (net of foreign taxes of $12,603) ...................... $132,873
Interest ......................................................... 21,737
Total investment income ...................................... 154,610
EXPENSES:
Distribution (note 3) ............................................ 79,269
Investment management (note 3) ................................... 79,269
Professional ..................................................... 27,536
Transfer agent ................................................... 25,391
Registration (note 3) ............................................ 18,209
Shareholder administration (note 3) .............................. 10,478
Custodian ........................................................ 10,404
Directors ........................................................ 2,479
Printing ......................................................... 1,947
Interest (note 5) ................................................ 1,677
Other ............................................................ 7,193
Net expenses ................................................. 263,852
Net investment loss .......................................... (109,242)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS,
FOREIGN CURRENCIES AND FUTURES:
Net realized gain from security transactions ..................... 91,573
Net realized gain from futures transactions ...................... 168,206
Unrealized depreciation of investments
and futures during the period .............................. (38,013)
Net realized and unrealized gain on investments,
foreign currencies and futures ............................. 221,766
Net increase in net assets resulting from operations ......... $112,524
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31,
1998 1997
OPERATIONS:
Net investment loss .....................................($109,242) ($55,218)
Net realized gain from futures transactions ........... 168,206 16
Net realized gain from security transactions .......... 91,573 953,347
Unrealized depreciation of investments and
futures during the period ....................... (38,013) (414,081)
Net increase in net assets resulting
from operations ................................. 112,524 484,064
DISTRIBUTIONS TO SHAREHOLDERS:
Distribution from net realized gains ($0.26 and $0.97
per share, respectively) ........................ (253,359) (1,011,463)
CAPITAL SHARE TRANSACTIONS:
Decrease in net assets resulting from capital share
transactions (a) ............................... (964,930) (863,088)
Total decrease in net assets .................... (1,105,765) (1,390,487)
NET ASSETS:
Beginning of period ................................. 8,445,645 9,836,132
End of period ....................................... $7,339,880 $8,445,645
<TABLE>
<CAPTION>
(a) Transactions in capital shares were as follows:
1998 1998 1997 1997
Shares Value Shares Value
<S> <C> <C> <C> <C>
Shares sold .......................... 33,554 $257,379 60,250 $499,924
Shares issued in reinvestment
of distributions ................. 33,361 228,517 123,585 885,948
Shares redeemed ......................(191,752) (1,450,826) (277,795) (2,248,960)
Net decrease ..............(124,837) ($964,930) (93,960) ($863,088)
</TABLE>
Notes to Financial Statements
(1) The Fund is a non-diversified series of common stock of Bull & Bear Funds I,
Inc. (the "Company"), a Maryland corporation registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The 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 overseas issuers. 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, investments in
<PAGE>
securities traded on a national securities exchange, unless over-the-counter
quotations for such securities are believed to more closely reflect their fair
value, and securities traded on the Nasdaq National Market System ("NMS") are
valued at the last reported sales price on the day the valuations are made. Such
securities that are not traded on a particular day, securities traded in the
over-the-counter market that are not on NMS, and foreign securities are valued
at the mean between the current bid and asked prices. Securities of foreign
issuers denominated in foreign currencies are translated into U.S. dollars at
prevailing exchange rates. Futures contracts are marked to market daily and the
variation margin is recorded as an unrealized gain or loss. When a contract is
closed, a realized gain or loss is recorded equal to the difference between the
opening and closing value of the contract. Forward contracts are marked to
market daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. When a contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if the counterparties are unable to meet the terms of the
contracts. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of discounts.
Premiums and discounts are amortized in accordance with income tax regulations.
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Dividend income and distributions to shareholders are
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all its taxable investment income and net capital gains, if any,
after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. Based on Federal income
tax cost of $6,261,318, gross unrealized appreciation and gross unrealized
depreciation were $1,343,974 and $640,556 at December 31, 1998. Distributions
paid to shareholders during the year ended December 31, 1998 differ from net
realized gains from security transactions as determined for financial reporting
purposes principally as a result of the utilization of net operating losses to
offset short-term capital gains.
(3) The Fund retains Bull & Bear Advisers, Inc. as its Investment Manager. Under
the terms of the Investment Management Agreement, the Investment Manager
receives a management fee, payable monthly, based on the average daily net
assets of the Fund at the annual rate of 1% on the first $10 million, 7/8 of 1%
from $10 million to $30 million, 3/4 of 1% from $30 million to $150 million, 5/8
of 1% from $150 million to $500 million, and 1/2 of 1% over $500 million. The
Investment Manager has agreed to waive all or part of its fee or reimburse the
Fund monthly if and to the extent the aggregate operating expenses of the Fund
exceed the most restrictive limit imposed by any state in which shares of the
Fund are qualified for sale, although currently the Fund is not subject to any
such limits. Certain officers and directors of the Fund are officers and
directors of the Investment Manager and Investor Service Center, Inc., the
Fund's Distributor. For the year ended December 31, 1998, the Fund paid $8,393
to Bull & Bear Securities, Inc., an affiliate of the Investment Manager, as
commissions for brokerage services. The Fund reimbursed the Investment Manager
$3,838 for providing certain administrative and accounting services at cost
during the year ended December 31, 1998.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"). Pursuant to the Plan, the Fund pays
the Distributor a distribution fee in an amount of three-quarters of one percent
per annum of the Fund's average daily net assets and a service fee in an amount
of one-quarter of one percent per annum of the Fund's average daily net assets.
The fee for service activities is intended to cover personal services provided
to shareholders in the Fund and the maintenance of shareholder accounts. The fee
for distribution activities is to cover all other activities and expenses
primarily intended to result in the sale of the Fund's shares. Investor Service
Center also received $10,478 for shareholder administration services supplied to
the Fund at cost for the year ended December 31, 1998.
(4) Purchases and sales of securities other than short term notes aggregated
$5,366,295 and $6,772,269 respectively, for the year ended December 31, 1998.
(5) The Fund has a committed bank line of credit. At December 31, 1998, there
was no balance outstanding and the interest rate was equal to the Federal
Reserve Funds Rate plus 1.00 percentage point. For the year ended December 31,
1998, the weighted average interest rate was 6.32% based on the balances
outstanding during the period and the weighted average amount outstanding was
$11,858.
(6) At December 31, 1998, the Fund had the following open futures contracts:
Unrealized
Contracts Futures Value Appreciation
2 S&P 500 Futures, expire March 1999 $622,750 $21,750
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PER SHARE
DATA*
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............................ $7.35 $7.91 $8.36 $7.08 $8.71
Income from investment operations:
Net investment loss .............................................. (0.1) (0.05) (0.24) (0.23) (0.13)
Net realized and unrealized gain (loss) on
investments ......................................... 0.18 0.46 0.68 2 (1.01)
Total from investment operations ........................... 0.08 0.41 0.44 1.77 (1.14)
Less distributions:
Distributions from net realized gains on investments ............. (0.26) (0.97) (0.89) (0.49) (0.49)
Net asset value at end of period .................................. $7.17 $7.35 $7.91 $8.36 $7.08
TOTAL RETURN ...................................................... 1.18% 5.64% 5.34% 25.11% (13.12)
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted) .......................$7,340 $8,446 $9,836 $9,808 $8,454
Ratio of expenses to average net assets (a) (b) ................... 3.33% 3.28% 3.20% 3.55% 3.53%
Ratio of net investment loss to average net assets (c) ............(1.38%) (0.63%) (2.74%) (2.85%) (1.65%)
Portfolio turnover rate ........................................... 69% 205% 255% 214 212%
</TABLE>
* Per share net investment loss and net realized and unrealized gain (loss) on
investments have been computed using the average number of shares outstanding.
These computations had no effect on net asset value per share.
(a) Ratio prior to reimbursement by the Investment Manager was 3.84% and 3.59%
for the years ended December 31, 1995 and 1994, respectively.
(b) Ratio after the custodian fee credits was 3.22% and 3.49% for 1997 and 1995,
respectively. Prior to 1995, such reductions were reflected in the expense
ratios. There were no custodian fee credits for 1998 and 1996. (c) Ratio prior
to reimbursement by the Investment Manager was (3.14)% and (1.71)% for the years
ended December 31, 1995 and 1994, respectively.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of Bull & Bear U.S. and Overseas Fund,
a series of Bull & Bear Funds I, Inc.:
We have audited the accompanying statement of assets and liabilities of Bull
& Bear U.S. and Overseas Fund, including the schedule of portfolio investments
as of December 31, 1998, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Bull & Bear U.S. and Overseas Fund as of December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 15, 1999
Total Return Performance Graphs
Bull & Bear U.S. and Overseas Fund ("Fund")
Morgan Stanley Capital International World Index ("MSCI")
Morningstar's World Stock Fund Average ("MSFA")
MSCI is unmanaged and fully invested in common stocks. MSFA is an equally
weighted average of 25 world equity mutual funds. The Fund may invest in any
type of U.S. or foreign securities, including Eurodollar securities, and engage
in options, futures and forward currency transactions. The Performance Graphs
cover January 1, 1989 to December 31, 1998, and reflect reinvestment of
dividends and distributions. Past performance is not predictive of future
performance.
Growth of $10,000 invested 1/1/89 through 12/31/98
[Graph omitted]
Final Total Average
Value Return Annual Return
Fund $19,555 95.55% 6.94%
MSCI 27,533 175.33 10.66
MSFA 29,520 195.20 11.43
U.S. AND
OVERSEAS
FUND
For Fund prospectuses and other
investment information, call toll-free
1-888-503-FUND
1-888-503-3863
For shareholder services by
Investor Access, call toll-free
1-888-503-VOICE
1-888-503-8642
Or, access the Fund on the web at
www.mutualfunds.net
